Diggin Tools Just Issued New Preferred Stock, Which Sold for $85

Multiple Choice

Diggin Tools just issued new preferred stock, which sold for $85 in the stock markets.Holders of the stock will receive an annual dividend equal to $9.35.The flotation costs associated with the new issue were 6 percent and Diggin's marginal tax rate is 30 percent.What is Diggin's cost of preferred stock, rps?

A) 11.0%
B) 7.7%
C) 8.2%
D) 11.7%
E) 10.3%