Based in Winnipeg, Manitoba, Defence Electronics Inc. $($DEI$)$ was founded to provide security systems, facilities controls and related services. DEI established a solid reputation for quality and the business grew thanks to strong relationships with large, long$-$term customers in Canada and the United States.

The Research and Innovation Group $($RIG$)$ is the development side of the company. They are considering a new contract that will strain resources for not only RIG, but the entire company. With an upfront cost of $$12\mathrm{.}0$ million, managers understand that the cost of capital will be a key part of maintaining and improving Clearview's competitive edge. You have been asked to calculate the company's weighted average cost of capital $($WACC$),$ based on the following information.

Over the last five years the annual dividends on the firm's common stock have grown at $4\mathrm{.}00$ percent per year and this growth is expected to continue indefinitely. A common share dividend of $$1\mathrm{.}520$ per share was recently paid. Common shares trade at $$83\mathrm{.}000$ per share. The company has authorized $545,000$ common shares, with $469,000$ common shares issued and outstanding.

The company has issued $99,000$ of the $109,000$ preferred shares authorized. The annual preferred share dividend is $$1\mathrm{.}720$ per share. The latest preferred share price is $$23\mathrm{.}200$ per share.

DEI has an outstanding bond issue, payable semi$-$annually, that originally had a $20$ year maturity. The initial bond offering was sold $7$ years ago, at par and raised $$14\mathrm{.}80$ million dollars. $($To be specific $14,800$ bonds were sold at $$1,000$ each.$)$ The yield to maturity, when they were issued, was $7\mathrm{.}10$ percent. Currently, the nominal yield to maturity on bonds with a similar risk is at $6\mathrm{.}29$ percent.

The company will use its current capital structure to set target weights for debt, preferred shares and common shares. Flotation costs are $5\mathrm{.}00$ percent for preferred shares, $6\mathrm{.}00$ percent for common shares and $6\mathrm{.}00$ percent for debt. The company's tax rate is $35\mathrm{.}00$ percent. After$-$tax earnings for the year will be $$2\mathrm{.}00$ million and the company has a payout ratio of $40\mathrm{.}00$ percent.

Use this information to answer the questions on the following requirements