A Company Has Preferred Stock with a Current Market Price

Multiple Choice

A company has preferred stock with a current market price of $18 per share.The preferred stock pays an annual dividend of 4% based on a par value of $100.Flotation costs associated with the sale of preferred stock equal $1.50 per share.The company's marginal tax rate is 40%.Therefore,the cost of preferred stock is

A) 28.80%.
B) 24.24%.
C) 22.22%.
D) 14.55%.