QUESTION $6$

The company has a target capital structure of $40\%$ debt and $60\%$ equity. Bonds pay $10\%$ coupon $($semi$-$annual payout$),$ mature in $20$ years, and sell for $$849\mathrm{.}54.$

The company stock beta is $1\mathrm{.}2.$

Risk$-$free rate is $10\%,$ and market risk premium is $5\%.$

The company is a constant growth firm that just paid a dividend of $$2\mathrm{.}00,$ sells for $$27\mathrm{.}00$ per share, and has a growth rate of $8\%.$

The company's marginal tax rate is $40\%.$

The after$-$tax cost of debt is:

$8\mathrm{.}0\%$

$7\mathrm{.}2\%$

$9\mathrm{.}1\%$