A firm has a perpetual stock that pays quarterly dividend of $4.50. It current price is $ 93,50. What is the rate of return (r) and the effective annual rate (EAR)?

A r=19.25, EAR=22.33

B r=19.25, EAR=20.68

C r=22.33, EAR= 20.68

D r=19.25, EAR=19.44

E r=17.90, EAR=20.68

10- Merrill Lynch’s cost of retained earnings is 12%, cost of preferred stock is 47% and its cost of debt is 10%. The optimal capital structure is 20% common stock, 50% preferred stock and 30% of debt. The firm will not be issuing any new stock and the marginal tax rate is 30%. What is the weighted average cost of capital for Merrill Lynch?

A 28.90%

B 28.00%

C 29.40%

D 26.80%

E 26.88%