You have been assigned to calculate the Weighted-Average-Cost-of-Capital for your firm, which has two sources of long-term capital. The companys marginal tax rate is 28%.

First, there are 6,500,000 shares of common stock, which are currently selling for $153.12. Recently, the firm announced EPS of $12.64. You feel that it is reasonable to assume that earnings will grow at 1.65% into the future.

Second, there is an issue of 260,000 coupon bonds with a face value of $1,000, which pays 6.35% (annual) coupons, and mature in twenty-three years. These bonds are currently trading for $1,182.10.

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