Suppose you are given the following information for Wonder Inc.
Debt: 25,000 bonds outstanding, with a face value of $1,000. The bonds currently trades for 96.667% of par and have 10 years to maturity. The coupon rate equals 7.25%, and the bonds make semi-annual coupon payments.
Common stock: 450,000 shares of common stock outstanding; currently trading for $142.81 per share. Beta equals 1.23.
Preferred stock: 90,000 shares of preferred stock outstanding; currently trading for $112.5 per share; pays a $6.25 dividend every year.
Market: The expected return on the market equals 9%, and the risk free rate is 2%.
Tax rate: 35%
Calculate the cost of preferred stock. (Enter percentages as decimals and round to 4 decimals)