Historically, the corporation's earnings and dividends per share have increased about 6.2 percent annually and this should continue in the future. Northwest's common stock is selling at $60 per share, and the company will pay a $4.50 per share dividend (D1). The company's $100 preferred stock has been yielding 8 percent in the current market. Flotation costs for the company have been estimated by its investment banker to be $2.00 for preferred stock. The company's optimum capital structure is 50 percent debt, 10 percent preferted stock, and 40 percent common equity in the form of retained earnings. Refer to the following table on bond issues for comparative yields on bonds of equal risk to Northwest. a. Compute the cost of debt, Kd. (Use the occompanying table-relate to the utility bond credit rating for yield) Note: Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places