Company A is seeking to purchase a major piece of equipment for $1.5 million. It will cost an additional $300,000, to ship and install the equipment. The equipment will result in annual cost savings of $950,000 over the next 3 years. The asset will be fully depreciated to $0 on a straight-line basis over the next 3 years. Company A then intends to sell the asset at the end of 3 years for an estimated market value of $300,000. The equipment purchase is part of a project in which Company A will invest 10% of the total cost of acquiring the asset into net working capital which will be fully recovered at the end of 3 years. Company A intends to finance the acquisition of the equipment as follows: - Issue 100,000 common stocks which are currently priced at $8.75 per share. The company's common stock has a beta of 1.5. - Issue 3,2006% preferred stock with $100 par value which are currently priced at $125 per share. - The remainder of the financing will be obtained from the issue of 25 -year semiannual 8\% $1,000 par value bonds, that would sell at 105%. Other information: - The company's tax rate is 20%. - The risk-free rate is 4% and the expected return on the market is 11.5%. What is the project's after-tax cost of debt