Ranch Manufacturing

(Weighted average cost of capital)

 As a member of the Finance Department of Ranch Manufacturing, your supervisor has asked you to compute the appropriate discount rate to use when evaluating the purchase of new packaging equipment for the plant. Under the assumption that the firms present capital structure reflects the appropriate mix of capital sources for the firm, you have determined the market value of the firms capital structure as follows.
Sources of Capital Market      Value
Bonds                                      $4100000
Preferred Stock                       $1700000
Common Stock                       $5900000

To finance the purchase, Ranch Manufacturing will sell a 10-year bonds paying 606% per year at the market price of $1039. Preferred stock paying $2.02 dividend can be sold for $24.85. Common Stock for Ranch Manufacturing is currently selling for $54.16 per share and the first paid a $3.08 dividend last year. Dividends are expected to continue growing at a rate of 5.4% per year in the indefinite future. If the firm’s tax rate is 30%, what discount rate should you use to evaluate the equipment purchase?

Ranch Manufacturing WACC is what %? Round to three decimal places