A certain corporation is trying to estimate its WACC. The current price of its $1,000 par-value bonds carrying a 8% annual coupon rate (with semi-annual payments) with 10 years remaining to maturity is $875. The beta of the firm's stock is estimated at 2.2, the current risk-free rate is 5% and the firm usually takes the market risk premium to be 7%. The entire common equity portion of the firm's capital budget is expected to come from retained earnings. Its target capital structure is 40% debt and 60% common equity. The firm is in the 40 percent tax bracket. Compute the firms WACC.