ABC company has bond outstanding of 100,000 selling at par. Similar bonds in the market have a yield rate of 7.5%. In its capital structure, the company also has 5 million common shares outstanding and one million preference shares outstanding of 10.5%. The systematic risk of the firm is 1.2 and has a stock price of $38. Preferred shares are trading in the market at a price of $56 per share. The market return is 12 percent, and the risk-free rate is 3 percent.

Required

Calculate the WACC of ABC company. (3 Marks)