A company's perpetual preferred stock currently sells for $102.50 per share, and it pays an $8.00 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 5.00% of the issue price. What is the firm's cost of preferred stock?
A. 8.22%
B. 9.28%
C. 6.90%
D. 9.53%
E. 7.97%
Answer: A
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