The Phillips Company is considering increasing its headphone production capacity to fulfill a large private contract. The CFO has tasked her finance staff to analyze the project and make a recommendation to the executive team to be included at next month$$s board meeting. The CFO provides the following information to the analyst:

COST OF CAPITAL

Phillips$$ current capital structure is comprised of $$300,000,000$ in debt, $$150,000,000$ in preferred equity, and $$450,000,000$ in common equity. Phillips currently has issued bonds that mature in $10$ years with a coupon rate of $7\mathrm{.}5\%$ and a current market price of $$865.$ Preferred shares of Phillips are trading at $$67/$share and pay an annual dividend of $$1\mathrm{.}75/$share$.$ Common stock of Phillips has a beta of $1\mathrm{.}1$ and trades at $$46/$share$.$ The $10-$year US treasury yield is $4\mathrm{.}25\%.$ The market risk premium is estimated at $7\mathrm{.}75\%.$ Their tax rate is $35\%.$

Round answers to four decimal places $($ie $\mathrm{.}1125$ or $11\mathrm{.}25\%)$