A firm has determined its optimal structure which is composed of the following sources and target market value proportions.

Debt:The firm can sell a 15-year, $1,000 par value, 8 percent bond for $1,026.

Common Stock:The firm's beta is 1.33, the market rate is 14% and the risk free rate is 5%.

Additionally, the firm has a marginal tax rate of 40 percent.

The firm's before-tax cost of debt is ________. (See Table 9.2)