Managerial Systems Inc. is expected to pay a 3.50 dividend at year end (D1 = $3.50), the dividend is expected to grow at a constant rate of 5.50% a year, and the common stock currently sells for $85.50 a share. The before-tax cost of debt is 7.50%, and the tax rate is 25%. The target capital structure consists of 46% debt and 65% common equity. What is the company's WACC if all the equity used is from retained earnings? Do not round your intermediate calculations.

 

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