Chilly Moose Fruit Producer $is$ considering a new project that will require $an$ initial investment $of$ $$4$ million. $It$ has a target capital structure $of35\%$ debt, $2\%$ preferred stock, and $63\%$ common equity. Chilly Moose Fruit has noncallable bonds outstanding that mature $in$ five years with a face value $of$ $$1,000,an$ annual coupon rate $of10\%,$ and a market price $of$ $$1,050\mathrm{.}76.$ The yield $on$ the company$s$ current bonds $is$ a good approximation $of$ the yield $on$ any new bonds that $it$ issues. The company can sell new shares $of$ preferred stock that pay $an$ annual dividend $of$ $$8at$ a price $of$ $$95\mathrm{.}70$ per share. Assume that Chilly Moose Fruit new preferred shares can $be$ sold without incurring flotation costs.

Chilly Moose Fruit does not have any retained earnings available $to$ finance this project, $so$ the firm will have $to$ issue new common stock $to$ help fund $it.$ Its common stock $is$ currently selling for $$33\mathrm{.}35$ per share, and $itis$ expected $to$ pay a dividend $of$ $$1\mathrm{.}36at$ the end $of$ next year. Flotation costs will represent $3\%of$ the funds raised $by$ issuing new common stock. The company $is$ projected $to$ grow $at$ a constant rate $of9\mathrm{.}2\%,$ and they face a tax rate $of40\%.$

Chilly Moose Fruit$s$ WACC for this project will $be$: