Macy Pharmacy's bonds have a 12 percent coupon, paid semiannually, a current maturity of 20 years, and sell for $1,000. Macy Pharmacy's beta is 1.2, the risk-free rate is 10%, and the market risk premium is 5%. Macy is a constant-growth firm which just paid a dividend of $2.00, sells for $27.00 per share, and has a growth rate of 8%. The firm's policy is to use a risk premium of 4 percentage points when using the bond-yield-plus-risk-premium method to find the cost of equity. The firm's marginal tax rate is 40 percent. What is the component cost of debt?

		10.0%
		9.1%
		8.6%
		8.0%
		7.2%