Bay Beach Industries wants to maintain their capital

structure of $40\%$ debt and $60\%$ equity. The firm's tax rate is

$34\%.$ The firm can issue the following securities to finance

the investments:

Bonds: Mortgage bonds can be issued at a pre$-$tax cost of

$10\mathrm{.}7$ percent. Debentures can be issued at a pre$-$tax cost of

$12$ percent.

Common Equity: Some retained earnings will be available for

investment. In addition, new common stock can be issued at

the market price of $$50.$ Flotation costs will be $$4$ per

share. The recent common stock dividend was $$6\mathrm{.}87.$

Dividends are expected to grow at $7\%$ in the future.

What is the cost of capital using mortgage bonds and

internal equity?

Set your calculator to $4$ decimal places. PLEASE INPUT THE

ANSWER IN PERCENT ROUNDING IT TO $2$ DECIMALS.

DO NOT INCLUDE $\%$ SIGN, E$.$G$.,$ INSTEAD OF $9\mathrm{.}9922\%$

INPUT $9\mathrm{.}99$