Firms that carry preferred stock in their capital mix want to not only distribute dividends to common shareholders but also maintain credibility in the capital markets so that they can raise additional funds in the future and avoid potential corporate raids from preferred shareholders. Consider the case of D&M Warehousing The CFO of D&M Warehousing has decided that the company needs to raise additional capital. It can sell preferred stock with a $8 dividend per share for $100 per share; however, it will incur a flotation cost of 2.7% per share. After it pays the underwriter, D&M Warehousing will receive from each share of preferred stock that it issues. Based on this information, D&M Warehousing's cost of preferred stock is from each After it pays the underwriter, D&M Warehousing will receive share of preferred stock $2.30 $2.70 $87.57 $97.30 Based on this information, D&M Warehousing's cost of preferred stock is 8.22% 6.99% 6.58% 9.04%