Annie's business has a $1,000 par value bond outstanding with 15 years to maturity. The bond carries an annual interest payment of $109 and is currently selling for $940 per bond. Annie's business is in a 35% tax bracket. The business wants to know what the aftertax cost of a new bond issue is likely to be. The yield to maturity on the new issue will be the same as the yield to maturity on the old issue because the risk and maturity date will be similar.

For Annie's business, assume the yield on the bonds goes up by one percentage point and that the tax rate is now 44%.

a. What is the new aftertax cost of debt? don't round intermediate calculations, and round the final answer to 2 decimal places.

Cost of debt________%