SW Inc'S Preferred Stock, Which Pays a $5

SW Inc.'s preferred stock, which pays a $5.25 dividend each year, currently sells for $62.50. The company's marginal tax rate is 40 percent. When it issues preferred stock, SW normally incurs flotation costs equal to 8 percent. What is the cost of preferred stock, r_ps, that should be included in the computation of the SW Inc.'s weighted average cost of capital (WACC) ?

A) 7.73%
B) 9.07%
C) 8.40%
D) 9.13%
E) 7.78%