Peter Pepper, owner of Pepper's Plastic Products Inc. (PPP), is pursuing a government contract to produce a specialty space-age plastic for use in the International Space Station. PPP has already invested $2.5 million dollars into research and development connected with the design and production of new space- age plastics and is now considered a leader in the field. The contract will last 4 years. If the land the government contract, PPP will have to invest an additional $1,800,000 in production equipment, but expects to be able to sell it to a competitor after the four years for $350,000. This new machinery will be placed in 35% CCA class. PPP owns a great deal of equipment and that particular CCA pool has a $1,000,000 per year for each of the four years of the project. Assume PPP's corporate tax rate is 40%, the risk free rate is 7%, the expected return on the market portfolio is 15%, and the CAPM is true. PPP is currently financed with $400 million of debt in the form of bonds and $600 million of equity. Each bond has a $1000 face value, a current market value of $981.28, 22 years to maturity and carries a coupon rate of 8% with coupons paid semi-annually. PPP's equity beta is 1.2. Calculate the pre-tax cost of debt of PPP expressed as a percentage with 4 decimal places