Calculatethe WACCwhich represents the "hurdle rate" for a typical project with average risk usingthe averageof the range of the marginal cost of common equity using retained earnings or new earnings.

Data:

A 15-year, 12% coupon, semiannual payment non-callable bonds sell for $1,153.72. New bonds will be privately placed with no flotation cost.

A10%, $1,000par value,annuallydividend, perpetual preferred stock sells for $1,111.

Both an existing common stock and a new common stock issue, whichincurs a flotation cost of 15% of the proceeds,sells for $50. D₁= $4.3995and g = 5%.b = 1.2; r_RF= 7%; RP_M= 6%.

Bond-Yield Risk Premium = 4%.

Target capital structure: 20% debt, 20% preferred, 60% common equity.

Tax rateis35%