Problem

Subtle Edge, Inc. presents the following excerpts from its December 31, 2014 balance sheet:

Current Liabilities:

Notes payable, 8%$200,000

Long-Term Liabilities:

Bonds payable, 10%1,000,000

Shareholders' Equity

Common stock, par50,000

Additional paid-in-capital, common stock350,000

Total contributed capital400,000

Retained earnings250,000

Total shareholders' equity$650,000

The accounting department also conveys the following information:

Risk-free rate of return - 3%

Average market rate of return - 7.5%

Beta - .90

Required:Compute Subtle Edge's cost of debt, equity, and overall cost of capital.