Flow Co. Inc. has $500 million of bonds at face value outstanding. The bonds have a coupon rate of 6.0% and a yield to maturity of 7.0%. They are currently traded in the market at 90% of face value. The company is publicly traded and has 20 million shares of common stock outstanding that sell for $67.50 per share. The stock's beta is 1.35, and the current 20 year treasury yield is 2.0%. The expected market risk premium is 7.0% and the relevant corporate tax rate is 25%. 1) What is the cost of debt that should be used in the calculation of the weighted cost of capital