Use the following information:

• Debt: $77,000,000 book value outstanding. The debt is trading at 92% of book value. The yield to maturity is 11%.
• Equity: 2,700,000 shares selling at $44 per share. Assume the expected rate of return on Federateds stock is 20%.
• Taxes: Federateds marginal tax rate isT_c= .40.

Suppose Federated Junkyards decides to move to a more conservative debt policy. A year later its debt ratio is down to 14.50% (D/V= .145). The interest rate has dropped to 10.6%. The companys business risk, opportunity cost of capital, and tax rate have not changed.

Use the three-step procedure to calculate Federateds 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%