1. Pettit Printing Company has a total market value of $96,352,593 , consisting of 1,240,000 shares selling for $41.96 per share and $44,323,080 of 4% perpetual bonds now selling at par. The company's EBIT is $6,670,000 , and its tax rate is 15%. Pettit can change its capital structure by either increasing its debt to 70% (based on market values) or decreasing it to 14%. If it decides to increase its use of leverage, it must call its old bonds and issue new ones with a 8% coupon. If it decides to decrease its leverage, it will call its old bonds and replace them with new 2% coupon bonds. The company will sell or repurchase stock at the new equilibrium price to complete the capital structure change. The firm pays out all earnings as dividends; hence its stock is a zero-growth stock. Its current cost of equity, rs, is 8%. If it increases leverage, rs will be 14%. If it decreases leverage, rs will be 6%. What is the firm's WACC if it moves to the high leverage capital structure?

   		10.1090%
   		10.3808%
   		8.9600%
   		11.9267%
   		7.4100%