22. Whitley Motors Inc. has the following capital.

Debt: The firm issued 900 25-year bonds five years ago which were sold at a par value of $1,000. The bonds carry a coupon rate of 7%, but are currently selling to yield new buyers 10%.

Preferred stock: 3,500 shares of 8% preferred were sold 12 years ago at a par value of $50. They’re now priced to yield 11%.

Equity: The firm got started with the sale of 10,000 shares of common stock at

$100 per share. Since that time earnings of $800,000 have been retained. The stock is now selling for $89. Whitley’s business plan for next year projects net income of $300,000, half of which will be retained.

The firm’s marginal tax rate is 38% including federal and state obligations. It pays flotation costs of 8% on all new stock issues. Whitley is expected to grow at a rate of 3.5% indefinitely and recently paid an annual dividend of $4.

Develop Whitley’s WACC before and after the retained earnings break and indicate how much capital will have been raised when the break occurs.