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The common stock is currently selling for $20 a share, pays a cash dividend of $0.75 per share, and is growing annually at 7 percent.

The common stock is currently selling for $20 a share, pays a cash dividend of $0.75 per share, and is growing annually at 7 percent. The preferred stock pays a $6.50 cash dividend and currently sells for $84 a share. Their bonds pay interest of 6.5 percent annually, and the firm is in the 40 percent marginal tax bracket. What is the after tax cost of debt?

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