A company has preferred stock that can be sold for $28 per share. The preferred stock pays an annual dividend of 5% 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 ate is 35%. Therefore, the cost of preferred stock is.
a. 18.87%
b. 17.86%
c. 11.61%
d. 12.26%