You are given the following information for Watson Power Co. Assume the companys tax rate is 40 percent.

Debt:	8,000 6.9 percent coupon bonds outstanding, $1,000 par value, 20 years to maturity, selling for 105 percent of par; the bonds make semiannual payments.
Common stock:	410,000 shares outstanding, selling for $59 per share; the beta is 1.15.
Preferred stock:	19,000 shares of 3 percent preferred stock outstanding, currently selling for $79 per share.
Market:	9 percent market risk premium and 4.9 percent risk-free rate.