Tarrasa Mining Corporation has 7.1 million shares of common stock outstanding and 195,000 6.4% semiannual bonds outstanding,
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Question:
Tarrasa Mining Corporation has 7.1 million shares of common stock outstanding and 195,000 6.4% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $28 per share and has a beta of 1.6. The bonds have 14 years to maturity and sell for 107% of par. The market risk premium is 7.5%, T-bills are yielding 6%, and Tarrasa Mining's tax rate is 40%.
What is the firm's cost of debt?(Report answer in percentage terms and round to 2 decimal places. Do not round intermediate calculations).
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