During the last few years, Citigroup Inc. has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansion program that has been proposed by the marketing department. Assume that you are currently an intern helping the CFO.

a-Your first task is to estimate the Citigroup Inc. weighted average cost of capital (WACC) and you have been provided with the following most recent data:

The firm's tax rate = 20%

Citigroup Inc. has issued 6% coupon semi-annual payment non-callable bonds, with a maturity date of 17of May 2027. The bonds are sold today 8th of May 2022 at $1022. New bonds would be privately placed with no flotation cost.

The current price of the firm's preferred stock is $160.10, and the dividend is $10. Citigroup Inc. will incur a flotation cost of $2 per share on a new issue.

The Citigroup Inc. common stock is currently selling at $43.26 per share. Its last dividend (D0)was $1.65, and dividends are expected to grow at 3% in the foreseeable future. The Citigroup Inc. beta is 0.56, the yield on T-bonds is 4% and the average return on the market is 10%.

The target capital structure is 25% for long term debt, 2% for preferred stock and 73% for common equity. What is The Citigroup Inc. weighted average cost of capital (WACC)?