Minerva Inc. is looking at setting up a manufacturing plant in Kirkland. This will be a 5-year project. The company bought the land in Kirkland 3 years ago for $4.5 million in anticipation of using it as a warehouse. The land is now appraised for $5 million after-tax. In 5 years, the after-tax value of the land is estimated for $6 million. The plant and equipment will cost $10.92 million to build and will be depreciated straight-line to zero over the project's 5-year life. The plant and equipment will be externally financed. The flotation cost of equity is estimated to be 10% and the flotation cost of debt is estimated to be 5%. The equipment can be sold for $2 million (before-tax) at the end of the project. The project requires $3 million in initial net working capital investment to get operational. The plant will raise sales by $4 million annually and reduce production expenses by $1 million annually. The companys tax rate is 20%. Finally, the following market data on Minerva Inc.s securities are current:

Common stock: Minerva Inc's most recent dividend was $2.00 per share, and dividends are expected to grow at a 5 percent annual rate indefinitely. The stock sells for $50 a share.

Debt: Minerva Inc. issued a 30-year, 7 percent, semiannual bond 12 years ago. The bond sells for 115 percent of its face value.

Minerva's target debt to equity (D/E) ratio is 0.25.

1. What is the Minerva Incs Weighted average cost of capital?