2. Question 25

   2 Points

   Quest, Inc.'s 8% stock ($75 par value) is selling for $80 a share. If the firm's marginal tax rate were 50 percent, the cost of new preferred would be closest to ________, assuming that the firm maintains its current capital structure in market value terms.

   1. 4%

   2. 3.8%

   3. 7.5%

   4. 9%