You are given the following information for Breckenridge, Inc.:

Debt: 1,000 7% coupon bonds outstanding, with 21 years to maturity and quoted price of 96. The bonds pay interest semiannually.

Common Stock: 234,000 shares of common stock selling for $40 per share. The stock has a beta of 0.8% and will pay a dividend of $3.60 next year. The dividend is expected to grow by 4.6% per year indefinitely

Preferred Stock: 21,000 shares of 4.7 preferred stock selling at $102 per share

Market: 9.2% expected return , risk-free rate of 1.6%, and a 29% tax rate.

What should Breckenridge use for the cost of equity when calculating the cost of capital? Do not round intermediate computations.