Calculate the WACC which represents the hurdle rate for a typical project with average risk using the average of 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.

A 10%, $1,000 par value, annually dividend, perpetual preferred stock sells for $1,111.

Both an existing common stock and a new common stock issue, which incurs a flotation cost of 15% of the proceeds, sells for $50. D₁ = $4.3995 and 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 rate is 35%.