Consider the case of Kuhn Co$.$

Kuhn Co$.$ is considering a new project that will require an initial investment of $$20$ million. It has a target capital structure of $45\%$ debt, $4\%$ preferred

stock, and $51\%$ common equity. Kuhn has noncallable bonds outstanding that mature in $15$ years with a face value of $$1,000,$ an annual coupon rate

of $11\%,$ and a market price of $$1,555\mathrm{.}38.$ 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 shares of preferred stock that pay an annual dividend of $$8$ at a price of $$95\mathrm{.}70$ per share. You can assume that Jordan

does not incur any flotation costs when issuing debt and preferred stock.

Kuhn 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 $$22\mathrm{.}35$ per share, and it is expected to pay a dividend of $$1\mathrm{.}36$ at the end of next year. Flotation costs will

represent $8\%$ of the funds raised by issuing new common stock. The company is projected to grow at a constant rate of $8\mathrm{.}7\%,$ and they face a tax

rate of $40\%.$ Determine what Kuhn Company's WACC will be for this project.