7. value: 10.00 points Use the following information: Debt: $85,000,000 book value outstanding. The debt is trading at 85% of book value. The yield to maturity is 9%. Equity: 3,500,000 shares selling at $52 per share. Assume the expected rate of return on Federated's stock is 18%. Taxes: Federated's marginal tax rate is Tc = .40. Suppose Federated Junkyards decides to move to a more conservative debt policy. A year later its debt ratio is down to 12.50% (DN = .125). The interest rate has dropped to 8.6%. The company's business risk, opportunity cost of capital, and tax rate have not changed. Use the three-step procedure to calculate Federated's WACC under these new assumptions. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Weighted average cost of capital %