You have been assigned to calculate the Weighted-Average-Cost-of-Capital for your firm, which has three sources of long-term capital. The companys marginal tax rate is 25%.

First, there are 507,500 shares of common stock, which are currently selling for $41.93. Recently, the firm announced EPS of $3.87. You feel that it is reasonable to assume that earnings will grow at 1.35% into the future.

Second, there are 45,000 shares of preferred stock outstanding that pay annual dividends of $3.50. These stocks are currently selling for $53.62.

Third, there is an issue of 4,500 coupon bonds with a face value of $1,000, which pays 5.10% (annual) coupons, and mature in eleven years. These bonds are currently trading for $948.07.

Given the assumptions, estimate the implied return on the common shares.

Group of answer choices

9.36%

10.58%

10.70%

11.41%