Fill in the Blank

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. (A, or No) tax adjustment is made when calculating r_ps because preferred dividends (,aren't, or are) tax deductible; so (the or ,no) tax savings are associated with preferred stock.

Quantitative section

Barton Industries can issue perpetual preferred stock at a price of $46 per share. The stock would pay a constant annual dividend of $2.90 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.