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Cost of the newly issued preferred shares

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Seven Eleven Stores is planning an expansion project that it desires to finance with newly issued preferred stock. The firm has an outstanding issue of preferred stock that pays a dividend of $4.25 per share, which is trading for $65 a share. The investment bankers have advised Seven Eleven that floatation costs will be 8% per share. What will be the cost of the newly issued preferred shares?

a.) 6.5%

b.) 7.1%

c.) 8.3%

d.) 9.7%

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The solution explains how to calculate the cost of the newly issued preferred shares.

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Preferred stock is a perpetuity and the cost is given as
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