Rollins Corporation is examining its cost of capital.The company has two sources of long-term fund: long-term debt (bond) and common equity.

Debt information:Its bonds have a 5 percent coupon, paid annually, with a maturity of 16 years, and are currently selling for $1,089.Par value is $1,000.The corporate tax rate is 35%.

Equity information:Rollins' beta is 0.95, the risk-free rate is 4 percent, and themarket rate of returnis 8 percent.Rollins is a constant dividend growth firm which is expected to pay a dividend of $1.12, sells for $22.00 per share, and has a dividend growth rate of 3 percent.

What is Rollins' after-tax cost of debt?