Maverick's Toys recently issued preferred stock at $50 per share. The stock pays a $2.50 dividend annually. What is the firm's cost of preferred stock? What is the after tax cost of preferred stock if the firm is in the 40% tax bracket?

a) 5%; 3% b) 8%; 8% c) 5%; 5% d) Preferred stock is not included in WACC calculations e) 8%; 4.8%