1. Bortles Inc. has a target capital structure of 40% debt, 5% preferred stock, and 55% common equity. The company's before-tax cost of debt is 6%, its cost of preferred stock is 7%, its cost of retained earnings is 10%, and its cost of new common stock is 12%. The company stock has a beta of 1.75 and the company's marginal tax rate is 35%. What is the company's weighted average cost of capital if retained earnings are used to fund the common equity portion?

   		.0825
   		.0851
   		.0741
   		.0935