The weighted average cost of capital (WACC) is used as the discount rate to evaluate various capital budgeting projects. However, it is important to realize that the WACC is an appropriate discount rate only for a project of average risk Consider the case of Turball Company: Turnbull Company has a target capital structure of 45% debt, 4% preferred stack, and 51 common equity. It has a before tax cost of debt of 11.10%, and its cost of preferred stock is 12 208. IF Turnbull can raise all of its equity capital from retained earnings, its cost of common equity will be 1470%. However, if it is necessary to raise new common equity, it will carry a cost of 16,804 Ir its current tax rate is 40%, Turnbull weighted average cost of capital (WACC) will be capital by issuing new common stock instead of raising the funds through retained earnings higher if it has to raise additional common equity Turnbull Company is considering a project that requires an initiat investment of $1,908,000.00. The firm will raise the $1,708,000.00 in capital by issuing $750,000.00 of debt at a before tax cost of 11.10%, $75,000.00 of preferred stock at a cost of 12 20 and $380,000.00 of equity at a cost of 14.709 The firm faces a tax rate of 40%. The WACC for this project is