The weighted average cost of capital (WACC) is used as the discount rate to evaluate vanous capital budgeting projects. However, it is important to realize that the WACC is an approptiate discount rate only for a project of average risk Consider the case of Tumbull Compariy: Tumbuli Company has a target capital structure of 58% debt, 6% preferred stock, and 36% common equity. It has a before-tax cost of debe of 11.10%, and its cost of preferred stock is 12.20%, If Turnbull can raise all of its equity capital from retained earnings, its cost of common equity will be 14.70%. Hownev, if it is necessary to raise new common equity, it will carry a cost of 16.80%. If its current tax rate is 40%, Turnbull's weighted average cost of capital (WACC) will be higher if it has to raise additional commen equity. capital by issuing new common stock insteod of raising the funds through retained eamings. Turnbull Company is considering a project that requires an initial investrment of $570,000,00. The firm will rase the $570,000,00 in capital by issuing. $230,000.00 of debe at a before-tax cost-of 9.60%,520,000.00 of preferred stock at a cost of 10.70%, and $320,000.00 of equity at a cost of 213.50\%. The firm faces a tax rate of 40%. The WACC for this project is