Industries finances its projects with 40% debt, 10% preferred stock, and 50% common stock.

• The company just issued 10-year bonds with a coupon rate of 11% that currently trade at $1,446.32 (semi-annually compounded).

• Newly issued preferred stock will pay annual dividends of $2 per share. The current price of preferred stock is $25 per share.

• The risk-free rate is 6%.

• The market rate of return is 14%.

• Fisher Industries beta is equal to 0.9.

• The companys tax rate is 40%.

• The flotation cost of issuing preferred stock is 10%.

3. What is Fisher Industries cost of debt?

a. 5.22% b. 9.11% c. 6.00% d. 7.58%