Your task is to find the cost of capital (WACC) for a company. The company has two sources of capital available. The marginal tax rate for the company is 30%.

Common stock: 250 000 shares outstanding. The book value per share is $10. However, the company was recently able to issue new stock with the price of $30. The company paid recently out $2.5 as dividends and the dividends are expected to grow by 2.5% forever. The risk free rate is 2% and the company's beta is 1.4. Expected market risk premium is 8%.

Debt: 500 coupon bonds with $10 000 par value and 4 years to maturity. The coupon rate is 3% but Bonds currently offer 4% yield to bondholders.

a) Find the cost of capital (WACC) for the company

b) Provide an explanation about what your result means?