Warnock Corporation is estimating its cost of preferred stock. It has outstanding a $$100$ face value issue that pays a $$9$ annual dividend and is currently selling for $$85\mathrm{.}00.$ Warnock would pay a $7\%($based on market value$)$ flotation cost to issue new preferred stock and is in the $25\%$ marginal tax bracket.

Reference: Ref $10-7$

Determine the preferred stock investors' required rate of return.