Q.16

A company's perpetual preferred stock currently sells for $122.50 per share, and it pays an $8.00 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 5.00% of the issue price. What is the firm's cost of preferred stock? 6.87% 7.01% 6.60% 5.98% 6.26%