A company is planning a new issue of $100 par preferred stock with a 12 percent dividend. The preferred stock can be sold for $95 per share and the company must pay flotation costs of 5 percent of the market price. Assuming a marginal tax rate of 40 percent, the after-tax rate of 40 percent, the after-tax cost of the preferred stock is closest to:()
A. 8.0%.
B. 12. 6%.
C. 13.3%.