You were hired as a consultant by a firm, whose target capital structure is 35% debt, 10% preferred, and 55% common equity. The firms noncallable bonds mature in 20 years, have a 5.5% annual coupon rate, a par value of $1,000 and a market price of $875. The companys tax rate is 33%. The risk-free rate is 2.55%, the required rate of return on the market is 9.4% and the stocks beta is 1.70. The firm also pays a $1.50 dividend on preferred stocks that currently trade at $12.63. What is the cost of capital?