1. CDE Inc.'s current (and optimal) capital structure is 40% debt, 10% preferred stock, and 50% common equity. Beta is in the 40% tax bracket. The company can issue up to $20,000,000 in new bonds at par with a 7% coupon rate; any subsequent amount must carry a 2% premium to compensate investors for the added risk. A new issue of preferred stock would pay an annual dividend of $4.00 and be priced to net the company $50.00 per share after the $3.00 per share floatation cost. The firm has $21,000,000 in retained earnings for the current period. Beta's common stock trades at $40.00 per share and the expected dividend on the common stock at t1 is 2.00. Flotation costs on a new common stock issue is $5.00 per share. The company is growing at 7% per year.

What is the WACC, assuming that the firm DOES NOT issue new common stock?