Zinn Corp. has 3.50 million shares of common stock outstanding. The firm is in steady-state growth, and analysts expect the firm’s earnings and dividends to continue to grow at their historical rate for the foreseeable future—per share dividends on common have grown from $2.00 six years ago to $2.70 today. Each share of Zinn’s common stock is selling for $34.07 today. The firm’s beta is estimated to be 1.80. The long-term Treasury rate is 2.75%, and the expected market risk premium is 5.75%. Analysts estimate that potential equity investors will require a premium of 5% over the firm’s bond yield.

The firm’s long-term debt consists of 7.25% coupon bonds, which were issued 9 years ago with an original maturity of 25 years. These bonds pay interest semiannually. Today, these bonds have a yield of 8.75%. The book value of these bonds is $300 million. Zinn Corp. also has 495,000 shares of perpetual preferred stock outstanding, and these pay a fixed dividend of $8 per year on a face value of $50. Each share of the firm’s preferred currently sells for $79. The firm’s marginal tax rate is 40%. Estimate the firm’s weighted average cost of capital (WACC).