4. (40 pts) You just started your new internship at Zac, Zach & Zack's Beanie Boos Distributors, a small-cap publicly-traded company that wholesale distributes cute, large-eyed stuffed animals (their favorite being Waddles the pig) . Your supervisor has just informed you that your first task will be to calculate the weighted average cost of capital (WACC) for ZZ&Z, who is in the 25% marginal tax bracket. The following general and company specific information has been provided to you:

ZZ&Z currently has semiannual coupon, $1,000 par value bonds with a 18-year maturity that pay $118 total annually in interest (paid semiannually). The current market price $940.50 for each bond.

ZZ&Z's common stock is currently selling for $34.50 per share and paid a common stock dividend of $2.70 earlier this year. Their beta is 1.3.

Also, you have found that U.S. 10-year treasuries are currently showing a 2.2% yield, and the S&P 500 has been averaging about 11% this year.

The book value capital structure of ZZ&Z is 30% long-term debt and 70% common stock. The current market value capital structure of ZZ&Z is 40% long-term debt and 60% common stock. The target capital structure of ZZ&Z is 45% long-term debt and 55% common stock.

Given the above information, determine the weighted average cost of capital (WACC) for ZZ&Z Distributors.