Sartell Golf Ball Inc. has just issued some preferred stock to raise capital to purchase a new golf ball dimpling machine. The stock was issued with a 12% annual dividend and a $100 par (face) value. It sold for $97.50 per share and the investment banker then charged me $2,50 per share to sell it.

1.Calculate my cost of capital for this preferred stock issue

2.If it sells with a 10% annual dividend and nets $90 per share for my company after flotation costs, what is the cost of capital under these conditions?