A public university system wants to apply the concept of the WACC to developing its interest rate for analyzing capital projects. It has an endowment of $850 million which is earning which is earning 6.3% interest. It is paying 4.5% interest on $300 million in bonds. It believes that $120 million in general funds from the taxpayers should be assigned an interest rate of 13%.

Question --> What is the university's cost of capital? Note that only new bonds or the interest on the endowment is available to fund capital projects.

Please provide a step by step solution.