Bunker Beach industries wants to maintain their capital structure of $40\%$ debt and $60\%$ equity. The firms tax rate is $34\%.$ The firm can issue the following securities to finance the investments:

Bonds: mortgage bonds can be issued at a pretax cost of $6\mathrm{.}5$ percent. Debentures can be issued at a pretax cost of $7\mathrm{.}8$ percent.

Common Equity: some retained earnings will be available for investment. In addition, new stock can be issued at the market price of $$50.$ Flotation cost will be five dollars per share. The recent common stock dividend was $$4\mathrm{.}16.$ Dividends are expected to grow at $4\%$ in the future.

What is the cost of capital using mortgage bonds and internal equity?