Dexter Corp has 9.4% coupon bonds outstanding that have a remaining maturity of 10 years. They pay interest semiannually, and are currently selling for $1075 for every $1000 of face value. The book value of these bonds is $500 million.

The firm also has perpetual preferred stock outstanding with a book value of $100 million. Each of these shares has a par value of $100, and is currently trading for $80. Each carries a fixed annual dividend of $10. Dexter common stock is trading at $38.40 per share.

The firm has 3 million common shares outstanding, and each share is expected to pay a dividend of $4.15 for the coming year (i.e. one year from today). Analysts expect Dexter earnings and per-share dividends to grow at a constant rate of 3.75% for the foreseeable future. Dexter stock is estimated to have a beta of 1.55. The estimated market risk premium is 7%, and the proxy for the risk free rate is the 3.25% yield on US Treasury securities. Finally, investors in Dexter common stock are estimated to require a 5.5% premium over the companys bond yield. Dexter faces a marginal tax rate of 25%.

Estimate its weighted average cost of capital (WACC).