Teresa Corporation has 6,000,000 shares of common stock outstanding; 400,000 shares of 3.2 percent preferred stock outstanding with $100 par value; and 200,000 bonds with a semiannual coupon of 5.8 percent outstanding, par value $1,000 each. The common stock currently sells for $49 per share and has a beta of 0.98; the preferred stock currently sells for $106 per share; and the bonds have 10 years to maturity and sell for 102 percent of par. The market return is 10.4 percent, Treasury Bills are yielding 2.8 percent, and the companys tax rate is 21 percent. Based on the above information, determine the cost of capital for Teresa Corporation. Explain for what purposes the company should use its cost of capital.