A companys perpetual preferred stock pays an annual dividend of $2.50 per share. The preferred stocks market value is $48.04 per share and the companys tax rate is 40%. If the flotation costs for preferred stock are 5%, what is the companys annual cost of new preferred stock financing?

Question 10 options:

1)

5.48%

2)

4.85%

3)

5.27%

4)

5.97%

5)

5.70%