Rubberman Corp. (RC), a manufacturer of consumer plastic products, is evaluating its capital structure. As a first step, the controller has been asked to calculate RCs current weighted average cost of capital (WACC). The controller has been provided with the following partial statement of financial position (in $ thousands): Long-term liabilities Bonds payable (11% coupon) $600,000 Shareholders equity Preferred shares ($7.50 par) $375,000 Common shares $400,000 Retained earnings $250,000

Management has also provided the following additional information: RCs preferred shares were issued at par, and have a current market price of $8 per share, and offer an annual dividend of $0.75 per share. The bonds payable were issued at face value and consist of a single issue with a remaining term to maturity of seven years and semi-annual coupon payments. The current yield to maturity (YTM) on bonds of comparable risk and maturity is 7.36%. Finally, the beta on RCs 75 million outstanding common shares is 1.20; the shares paid a dividend of $0.60 per share last year, which is expected to grow at an average annual rate of 1% for the foreseeable future; and the shares have a current market price of $5 per share. RCs marginal tax rate is 39%.

Required: Calculate RCs current WACC.