Last two options are (should/ should not) and (are/ are not)

Firms that carry preferred stock in their capital mix want to not only distribute dividends to common stockholders 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 stockholders. Consider the case of Red Oyster Seafood Company Red Oyster Seafood Company has preferred stock that pays a dividend of 57 per share and sells for $100 per share. It is considering issuing new shares of preferred stock. These new shares incur an underwriting (or flotation) cost of 2.2%. How much will Red Oyster Seafood Company pay per share to the underwriter? $97.80 per share O $88.02 per share $2.20 per share $2.42 per share Based on this information, what is Red Oyster Seafood Company's cost of preferred stock capital? 7.16% 5.73% 7.88% 6.44% Companies make tax adjustments when calculating the after-tax) cost of preferred stock because preferred dividends tax deductible, so the company bears their full cost