Kuhn Co

$.$

$$is considering a new project that will require an initial investment of $

$2$

$0$

$$million$.$ It has a target capital structure of

$3$

$5$

$\%$

$$debt$,$

$2$

$\%$

$$preferred stock, and

$6$

$3$

$\%$

$$common equity. Kuhn has noncallable bonds outstanding that mature in

$1$

$5$

$$years with a face value of $

$1$

$,$

$0$

$0$

$0$

$,$

$$an annual coupon rate of

$1$

$1$

$\%$

$,$

$$and a market price of $

$1$

$5$

$5$

$5$

$.$

$3$

$8$

$.$

$$The yield on the company

$$

s current bonds is a good approximation of the yield on any new bonds that it issues. The company can sell shares of preferred stock that pay an annual dividend of $

$9$

$$at a price of $

$9$

$2$

$.$

$2$

$5$

$$per share.

Kuhn does not have any retained earnings available to finance this project, so the firm will have to issue new common stock to help fund it

$.$

$$Its common stock is currently selling for $

$2$

$2$

$.$

$3$

$5$

$$per share, and it is expected to pay a dividend of $

$1$

$.$

$3$

$6$

$$at the end of next year. Flotation costs will represent

$3$

$\%$

$$of the funds raised by issuing new common stock. The company is projected to grow at a constant rate of

$9$

$.$

$2$

$\%$

$,$

$$and they face a tax rate of

$2$

$5$

$\%$

$.$

$$What will be the WACC for this project?

$($

Note: Round your intermediate calculations to two decimal places.

$)$

$$A

$.$

$9$

$.$

$1$

$0$

$\%$

$$ B

$.$

$1$

$3$

$.$

$6$

$6$

$\%$

$$C

$.$

$1$

$1$

$.$

$3$

$8$

$\%$

$$D

$.$

$1$

$1$

$.$

$9$

$5$

$\%$