SW Inc'S Preferred Stock, Which Pays a $5 Dividend Each Year

Multiple Choice

SW Inc.'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, rps, that should be included in the computation of the SW Inc.'s weighted average cost of capital (WACC) ?

A) 10.00 percent
B) 4.00 percent
C) 5.00 percent
D) 8.00 percent
E) 2.00 percent