You have been asked to review the calculation of the cost of capital of a software firm, done by an eminent analyst. You note that the analyst has assumed that the capital structure consists of 30 percent debt, 10 percent preferred stock and 60 percent common equity. The company has 20-year bonds outstanding with a 9 percent coupon compounded annually, that are trading at a value of $980. The value at par is $1000. The risk-free rate is 5.5 percent. The market return is 10.5%. The stocks beta is 1.4. The last paid out dividend is $2.50 per share, and the dividend is expected to grow forever at a constant rate of 12 percent a year. The price of the stock is $50 and each stock will have flotation costs of $5. The preferred stock will have a fixed dividend of $ 6.68 per share and the price of the preferred stock is $63 and the flotation cost for preferred stocks is equal to $3 per stock. The company estimates that it will have to issue new common stock to help fund this years projects. The companys tax rate is 30 percent.

a-What is the companys weighted average cost of capital (WACC)?