Cost of Preferred Stock

The cost of preferred stock, rp$,$ used in the weighted average cost of capital equation is calculated as the preferred dividend, Dp$,$ divided by the current price of the preferred stock, Pp$.-$Select$-$ OPTION $1($A$)$ OPTION $2($No$)$ tax adjustment is made when calculating rp because preferred dividends $-$Select$-$ OPTION $1($aren$\text{'}$t$)$ Option$2($are$)$ tax deductible; so $-$Select$-$ OPTION $1($the$)$ OPTION $2($no$)$ tax savings are associated with preferred stock.

Quantitative Problem: Barton Industries can issue perpetual preferred stock at a price of $$51$ per share. The stock would pay a constant annual dividend of $$3\mathrm{.}92$ per share. If the firm's marginal tax rate is $25\%,$ what is the company's cost of preferred stock? Round your answer to two decimal places.