XYZ Corporation is trying to determine the appropriate cost ofpreferred stock to use in determining the firms cost of capital.This firms preferred stock is currently selling for $36 and paysa perpetual annual dividend of $2.60 per share. Underwriters of anew issue of preferred stock would charge $6 per share in flotationcosts. The firms tax rate is 30%. Compute the cost of newpreferred stock for XYZ.a. 6.2%b. 7.2%c. 8.7%d. 16.7%