XYZ Corporation is trying to determine the appropriate cost of preferred stock to use in determing the firm's cost of capital. This firm's preferred stock is currently selling for $36,and pays a perpetual annual dividend of $2.60 per share. Underwriters of a new issue of preferred stock would charge $6 per share in flotation costs. The firm's tax rate is 30%. Compute the cost of new preferred stock for XYZ.
