Assume that your company currently has the following characteristics:

D/(D+E) = 0.10 Rf = 3%

Market Risk Premium = 5.0%

Beta = 1.4

Current EBIT = 300,000 Interest = 60,000

tax rate = 30% In addition, you obtain the following data from a rating agency:

For smaller and riskier firms: If interest coverage

ratio is greater than to Rating is Spread is

0.50 0.799 C 10.50%

0.80 1.249 CC 9.50%

1.25 1.499 CCC 8.75%

1.50 1.999 B- 6.75%

2.00 2.499 B 6.00%

2.50 2.999 B+ 5.50%

3.00 3.499 BB 4.75%

3.50 3.999 BB+ 3.75%

4.00 4.499 BBB 2.50%

4.50 5.999 A- 1.65%

6.00 7.499 A 1.40%

Estimate the current cost of capital (in percent to 1 decimal) for your company. ( i.e., if you calculate .10234, answer 10.2)