The company has 100,000 bonds with an 12% coupon rate, payable semiannually, 20 years to maturity, selling at $1,125 per bond. The company also has 1,500,000 shares of common stock outstanding. The stock sells for a price of $65 per share and has a beta of 1.5. Additionally, the company has 200,000 preferred shares outstanding, currently trading at $115 per share; with an annual dividend payment of $8.75. The market risk premium is 8% and the risk free rate is 2.5%. The tax rate is 21%. What is the before-tax cost of debt?