The weighted average cost of capital (WAcC) is used as the discount mate to evaluate various capital budgeting projects. However, it is irnportant to realize that the WACC is an appropriate discount rate only for a project of average risk. Consider the case of Furnbud Company: Tumbull Company has a rarget capital structure of 58ab debt, 6% preferred stock, and 36%6 common equity. It his a before-tax cost of debt of 8.20%, and its cost of preferred stock is 9.30%. If Tarmbull can raise all of its equity capital from retained earnings, its cost of common equity will be 12.40%. However, if it is necessary to rase new common equity, it will carry a cost of 14,20%. If its current tax rate is 40%, Turnbull's weighted average cost of capital (WACC) will be higher if it has to raise additionat common equity capital by issuing new common stock instead of ratsing the funds through retainiod earnings. Turnbull Company is considering a project that requires an initial investment of $270,000.00. $100,000.00 of debt at a before. tax cost of 11.10%,$30,000.00 of preferred stock at a cost of 12.20%, and $140,000,00 of equity at a cost of 14.70\%. The firm faces a tax rate of 40%. The WACC for this project is