Problem 11-13 Cost of preferred stock [LO3] Medco Corporation can sell preferred stock for $90 with an estimated flotation cost of $2. It is anticipated the preferred stock will pay $8 per share in dividends. a. Compute the cost of preferred stock for Medco Corp. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) b. Do we need to make a tax adjustment for the issuing firm? Input variables: Ka is cost of preferred stock Dp is the annual dividend on preferred stock Preferred stock price Flotation cost Dividend $90 $2 $8 K,-DMPp-F) P, is the price of preferred stock Fis flotation, or selling, cost Solution and Explanation: Cost of preferred b. Tax adjustment needed