A firm is paying an annual dividend of 2.65 for its preferred stock that is selling for 57.00. There is a selling cost of 3.30. What is the after-tax cost of preferred stock if the firm's tax rate is?

To calculate the after-tax cost of preferred stock, we first determine the cost of preferred stock before taxes. The formula is ( \text{Cost of Preferred Stock} = \frac{\text{Annual Dividend}}{\text{Net Proceeds}} ). The net proceeds are the selling price minus the selling cost, which is ( 57.00 - 3.30 = 53.70 ). Thus, the cost is ( \frac{2.65}{53.70} \approx 0.0493 ) or 4.93%. Since preferred dividends are not tax-deductible, the after-tax cost remains the same at approximately 4.93%.