The CCL Corporation is preparing to evaluate the capital expenditure proposals for the coming year. Because the firm employs discounted cash flow methods of analyses, the cost of capital for the firm must be estimated. The following information for CCL Corporation is provided.

-Market price of common stock is P60 per share.

-The dividend next year is expected to be P3.50 per share.

-Expected growth in dividends is a constant 10%.

-New bonds can be issued at face value with a 13% coupon rate. The capital structure of 60% long-term debt and 40% equity is considered to be optimal.

-Anticipated earnings to be retained in the coming year are P3 million. The firm has a 27.5% corporate tax rate. If the firm must assume a 10% flotation cost on new stock issuances, what is the cost of long-term debt?