XYZ Corporation is trying to determine the appropriate cost of preferred stock to use in determining 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.
Cost of new preferred stock
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