St. Thomas Company is planning to issue $1,000 par value bonds.  The bonds will have a coupon rate of 9.5 percent and will be sold at a market price of $980.  Flotation costs will amount to 4 percent of market value.  The bonds will mature in 15 years and coupon payments will be semi-annual.  St. Thomas' marginal tax rate is 35%.  What is the firm's cost of debt financing?

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