LUVFINANCE, Inc. is estimating its WACC. It is operating at its optimal capital structure. Its outstanding bonds have a

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LUVFINANCE, Inc. is estimating its WACC. It is operating at its
optimal capital structure. Its outstanding bonds have a 12 percent
coupon, paid semiannually, a current maturity of 17 years, and sell
for $1,162. It has 100,000 bonds outstanding. The firm can issue
new 20-year maturity semiannual bonds at par but will incur
flotation costs of $50 per bond (Hint: the coupon rate on the new
bonds = the YTM on existing bonds). The firm could sell, at par,
$100 preferred stock that pays a 12 percent annual dividend that is
currently selling for $120. The firm currently has 1,000,000 shares
of preferred stock outstanding. Rollins' beta is 1.85, the
risk-free rate is 2.33 percent, and the market risk premium is 6
percent. The common stock currently sells for $100 a share and
there are 5,000,000 shares outstanding. The firm's marginal tax
rate is 40 percent. What is the WACC?