Determining the Cost of Capital: Cost of Preferred Stock

The cost of preferred stock, r_ps, used in the weighted average cost of capital equation is calculated as the preferred dividend, D_ps, divided by the current price of the preferred stock, P_ps. -Select-ANoItem 1 tax adjustment is made when calculating r_ps because preferred dividends -Select-aren'tareItem 2 tax deductible; so -Select-thenoItem 3 tax savings are associated with preferred stock.

Quantitative Problem: Barton Industries can issue perpetual preferred stock at a price of $47 per share. The stock would pay a constant annual dividend of $4.10 per share. If the firm's marginal tax rate is 40%, what is the company's cost of preferred stock? Round your answer to two decimal places. %