QuinIan Enterprises stock trades for $52.50 at year is expected to pay a $2.50 dividend at year end (D_1 = $2.50), and the dividend is expected to grow at a constant rate of 5.50% a year.
The before-tax cost of debt is 7.50%, and the tax rate is 40%. The target capital structure consists of 45% debt and 55% common equity.
What is the company's WACC if all the equity used is from retained earnings?