SW Ink's preferred stock, which pays a $5 dividend each year, currently sells for $62.50. The company's marginal tax rate is 40 percent. What is the cost of preferred stock, r_ps, that should be included in the computation of the SW Ink's weighted average cost of capital (WACC)?

{C}

a. 3.2%

{C}

b. 8.0%

{C}

c. 4.8%

{C}

d. The dividend growth rate is needed to compute rps; so not enough information is given to answer this question.

{C}

e. None of the above is correct.

{C}

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