ABC Ltd. has the following book value capital structure at the present time:

Bonds (Remaining Maturity = 20 years; coupon rate = 10%; semi-annual coupon payments and number of bonds = 30,000)..$30 million Common stock (Number outstanding = 1.5 million).25

Retained earnings...10______

$65 million

New debt financing is available in the form of bonds, with each bond with the face value of $1,000, the annual coupon of 8%, term = 20 years, coupon payments semi-annual and these bonds can be sold at their face values. Common shares can be sold to the public at $30 per share. The firm has beta of its common stock equal to 2.5, the current yield on the risk-free asset is 3 percent, and the yield on the market portfolio is expected to be 10 percent. The expected earnings per share at the end of the year are $4.5. The firms tax rate is 40 percent. Assume that the current market values of firms bonds and common stock provide firms desired structure over time.

Compute ABCs weighted average cost of capital.