Desserts Corp. (DC) needs to calculate its current weighted average cost of capital (WACC) for valuation purposes. DC has the following existing capital structure:

Long-term debt outstanding is $3,400,000 at face value, due in 15 years. It bears interest at 6% annually, but the current market yield on similar risk debt is 7%. Interest is paid annually.

There are 100,000 preferred shares outstanding with a current market price of $20 per share. The preferred shares pay an annual dividend of $1.75 per share.

There are 500,000 common shares outstanding with a current market price of $14.30 each. The beta for the company is 1.5. The current risk-free rate is 4% and the market risk premium is 6.5%. The companys marginal income tax rate is 25%.

Required: Calculate DCs current WACC.