Electric Youth, Inc. (EY) is a publicly-traded firm that is the market share leader in perfume for teenagers. You are charged with estimating the cost of capital for the firm. The following market data on EYs securities are current:

Debt	10,000 seven percent coupon bonds outstanding, 15 years to maturity, selling for 92 percent of par; the bonds have a $1,000 par value each and make annual payments.
Common stock	250,000 shares outstanding, selling for $55 per share; the beta is 1.4.
Market	7 percent expected market risk premium; 5 percent risk-free rate.

EYs tax rate is 22 percent.

To do: estimate EYs cost of capital. Show all work.