Use the following information:

Debt: $$73,000,000$ book value outstanding. The debt is trading at $91\%$ of book value. The yield to maturity is $11\%.$

Equity: $2,300,000$ shares selling at $$40$ per share. Assume the expected rate of return on Federated's stock is $20\%.$

Taxes: Federated's marginal tax rate is $T_C=0\mathrm{.}21.$

Suppose Federated Junkyards decides to move to a more conservative debt policy. A year later, its debt ratio is down to $15\mathrm{.}50\%($D$)=$

$0\mathrm{.}1550.$ The interest rate has dropped to $10\mathrm{.}6\%.$ The company's business risk, opportunity cost of capital, and tax rate have not

changed.

Use the three$-$step procedure to calculate Federated's WACC under these new assumptions. $($Do not round intermediate

calculations. Enter your answer as a percent rounded to $2$ decimal places.$)$

Weighted$-$average cost of capital