You are the chief accountant for zm corp., which is located in illinois. in november 2017, that state had the second highest unemployment rate in the midwest: 4.9% (down from 6.1% in january 2015).1 for the past few years, you have noticed that the company's bad debt rate has been about 7% of year-end accounts receivable. that rate of bad debts has severely affected the company's profitability…especially since management has steadily been lowering the standards for granting credit to customers.

Western electric has 32,000 shares of common stock outstanding at a price per share of $79 and a rate of return of 13.00 percent. the firm has 7,300 shares of 7.80 percent preferred stock outstanding at a price of $95.00 per share. the preferred stock has a par value of $100. the outstanding debt has a total face value of $404,000 and currently sells for 111 percent of face. the yield to maturity on the debt is 8.08 percent. what is the firm's weighted average cost of capital if the tax rate is 39 percent?