Jake the Dog Inc. is investing in a new portable iguana killing machine that will cost $200.000. The machine has a useful life of 6 years and falls into the 5-year property class for the depreciation purposes. The IRS MACRS schedule for the six years is: (1) 20% (2) 32%, (3) 19.2% (4) 11.52%, (5) 11.52% (6) 5.76%. It will generate $50,000 per year of savings for Jake and can be sold for $50,000 at the end of the 6-year period. Jake's corporate tax rate is 34%. In addition, Jake has 2000 outstanding 9% annual coupon bonds with a $1000 par value, 20 years to maturity and a price of $1085. Jake also has 60,000 shares of common stock outstanding that is selling for $45 per share. This stock has a beta of 2.45 (its Jake! he is a risky dog-dude!), the expected market return is 12% and the risk-free rate is 5%. Finally, Jake has 36,000 shares preferred stock outstanding that pays a 55% dividend and sells for $40 per share. What is the after-tax cost of debt for Jake? 0 4.86% @ 5.36% 6.36% 7.65% 5.44%