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. Which of the following is the component cost of preferred stock, rps? (Round off the answer to two decimal places.)?
A. ?10.75 percent
B. ?10.52 percent
C. ?12.25 percent
D. ?11.70 percent
E. ?11.05 percent
Answer: D
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What will be an ideal response?
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