Rollins Corporation is estimating its WACC. Its target capital structure is 20 percent debt, 20 percent preferred stock, and 60 percent common equity. Its bonds have a 12 percent coupon, paid semiannually, a current maturity of 20 years, and sell for $1,000. The firm could sell, at par, $100 preferred stock which pays a 12 percent annual dividend, but flotation costs of 5 percent would 'be incurred. Rollins' beta is 1.2 , the risk-free rate is 10 percent, and the market risk premium is 5 percent. Rollins is a constantgrowth firm which just paid a dividend of $2.00, sells for $27.00 per share, and has a growth rate of 8 percent. The firm's olicy is to use a risk premium of 4 percentage points when using the bond-yield-plus-risk-premium method to find r5. The firm's marginal tax rate is 40 percent. Refer to Scenario 10-1. What is Rollins' component cost of debt? 10.0% 9.1% 8.6% 8.0% 7.2%