Your firm has a beta of 1.2 and a capital structure that is 45% equity and 55% debt. Your (pre-tax) cost of debt is 4.5%. The current market risk premium is 5%, and the applicable risk-free rate is 2.5%. The firm's tax rate is 25%. While conducting a valuation of your firm, you first use a DCF approach to obtain a terminal value (i.e., applying terminal growth to the final FCF to establish a perpetuity). After obtaining this value, you know you still have to discount it back to today. Which of the following is closest to the correct discount rate to apply to the terminal value you've obtained? If necessary, you can assume a debt beta of 0.3 for all firms.
	8.50%
	5.68%
	6.03%
	4.50%
	3.38%