BBNU Inc. is trying to determine the appropriate cost of preferred stock to use in determining the firms cost of capital. This firms preferred stock is currently selling for RM36 per share with a promised annual dividend of RM2.60 per share. Underwriters of a new issue of preferred stock would charge RM6 per share in flotation costs. The firms tax rate is 35%. Compute the cost of a new preferred for BBNU.

Select one:

A. 7.22%

B. 5.63%

C. 4.69%

D. 8.67%