A company uses only bonds and common stock to finance its operations and maintains a debt to equity ratio of 1 (i.e. 50% debt, 50% equity). Its bonds are currently trading at par, have an annual coupon of 6% and mature in 10 years. maturity in 10 years. Its stock has a beta of 1.5 and. Treasury bills have a yield of 2.5%. The The market risk premium is 7%. The firm's marginal normal tax rate is 40%. Calculate the cost of capital.