The Big Bob's Ski Corporation is assessing its capital projects and funding, and wishes to develop an estimate of the cost of capital for a typical risk project for the firm. Investment bankers estimate that new Big Bob's bonds can be issued to yield 10% and that new preferred stock can be issued to yield 12%. The marginal tax rate of the Big Bob's Ski Corporation is 25%. the after-tax cost of preferred stock is closest to ...

4.2%

12%

22%

14.3%

7.7%