The following table gives the balance sheet for Travellers Inn Inc. (TII), a company that was formed by merging a number of regional motel chains. Travellers Inn (Millions of Dollars) Cash Accounts $10 Accounts payable 20 Accruals $ 10 15 receivable Inventories 20 Short-term debt Current assets $50 Current abilities $ 25 Net fixed assets 50 Long-term debt 30 Preferred stock (50,000 shares) 5 Common equity Common stock (3,800,000 shares) $ 10 Retained earnings Total common equity 30 Total assets $100 Total liabilities and equity $40 $100 The following facts also apply to TII: 1. The long-term debt consists of 29,412 bonds, each having a 30-year maturity, semiannual payments, a coupon rate of 7.4%, and a face value of $1,000. Currently, these bonds provide investors with a yield to maturity of 11.8%. If new bonds were sold, they would have an 11.0% yield to maturity. 2. TII's perpetual preferred stock has a $100 per value, pays a quarterly dividend per share of $4, and has a yield to investors of 8%. New perpetual preferred stock would have to provide the same yield to investors, and the company would incur a 3.95% flotation cost to sell it.) 3. The company has 3.8 million shares of common stock outstanding, a price per share Po $20, dividend per share Do $1, and earnings per share EPS $5. The retur on equity (ROE) is expected to be 10%. 4. The stock has a beta of 1.6. The T-bond rate is 6%, and RP is estimated to be 5%. 5. TII's financial vice president recently polled some pension fund investment managers who hold TII's securities regarding what minimum rate of return on TII's common would make them willing to buy the common rather than TII bonds, given that the bands yielded 11.0%. The responses suggested a risk premium over TII bonds of 3 percentage points. 6. TII is in the 25% federal-plus-state tax bracket. Assume that you were recently hired by TII as a financial analyst and that your boss, the treasurer, has asked you to estimate the company's WACC under the assumption that no new equity will be issued. Your cost of capital should be appropriate for use in evaluating projects that are in the same risk cless as the assets TII now operates. Based on your analysis, answer the following questions. Do not round intermediate calculations. Round your answers to two decimal places