Coral Inc.'s preferred stock currently sells for $90 a share and pays a dividend of $10 per share. However, the firm will net only $80 per share if it issues new preferred stock. What is Coral's cost of preferred stock? Coral's marginal tax rate is 35 percent.
A. 8.13%
B. 12.50%
C. 11.11%
D. 7.22%
E. 11.76%
Answer: B
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