A companys Balance Sheet (in millions) Assets Liabilities & Equity Current $20 Net Fixed $80 Bonds ($1000 Par) 40 Preferred stocks ($100 Par) 20 Total $100 Common Stock ($1 par) 40 Total $100 The company's bonds have 15 years to mature, pay 12% coupon rate semi-annually and comparable bonds' YTM is 14%. The market price of the common stock is $3.25 per share. The most recent dividend on the common stock was $0.85. The companys applicable tax rate is 30%. The common stock dividend has been growing steadily at 4% per year. The same growth rate is expected to continue for long time in the future. The floatation cost for issuing new common stocks is 10%. The market value of the preferred stock is $85 and it pays quarterly dividend of $1.35. The floatation cost on issuing new preferred stock is 5% Assume the company will issue new preferred stocks and new common stocks. What is the cost of issuing new preferred stock?

6.69%

13.95%

11.58%

4.37%

8.54%