Builtrite's common stock is currently selling for $58 a share and the firm just paid an annual dividend of $2.30 per share.Management believes that dividends and earnings should grow at 7% annually.Since new stock would need to be sold to finance an expansion, Builtrite expects flotation costs to be 5% of the expected selling price of $58 a share. Based on this, and a marginal tax rate of 34%, what is the cost of new common stock?

12.6%

8.3%

7.6%

11.5%

Preferred stock is called a hybrid security because it takes on the attributes of both common stock and bonds.

True

False