Woodhouse Motors has a target capital structure of 40% debt and 60% equity. The cost of debt financing is 9% and the company’s tax rate is 40%.

Woodhouse Motors has a target capital structure of 40% debt and 60% equity. The cost of debt financing is 9% and the company’s tax rate is 40%. The CFO of Woodhouse has calculated the company’s WACC as 9.96%. What is their cost of equity capital?

Round to 1 decimal point, if your answer was 4.1%, enter 4.1.