Company has 60,000 bonds with 30-year life outstanding, 15 years until maturity. The bonds carry a 10 percent semi-annual coupon, and are currently selling for $874.78.

You have 100,000 shares of $100 par, 9% dividend perpetual preferred stock outstanding. The current market price is $90. Any new issues of preferred stock would incure a $3.00 per share flotation cost.

The company has 5 million shares of common stock outstanding with a currently price of $14 per share. The stock exhibits a constant growth rate of 10 percent. The last dividend was $.80. New stock could be sold with flotation costs, including market pressure, of 15 percent.

The risk-free rate is currently 6 percent, and the rate of return on the stock market as a whole is 14 percent. Your stock’s beta is 1.22.

Your firm does not use notes payable for long-term financing.

Your firm’s federal + state marginal tax rate is 40%

Before-Tax Cost of Debt          11.80%

After-Tax Cost of Debt 7.08%

Preferred stock 10.34%

average cost of retained earnings

DCF       16.29%

Compute the WACC (carry weights to four decimal places)