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%