(Cost of debt)

Carraway Seed Company is issuing a $1,000 par value bond that pays 7 percent annual interest and matures in 15 years. Investors are willing to pay $850 for the bond. Flotation costs will be 3 percent of market value. The company is in a 30 percent tax bracket. What will be thefirm's after-tax cost of debt on the bond?

The firm's after-tax cost of debt on the bond will be ___