Integrated Septic Services, is manufacturer of septic tanks whose slogan is "we are number 1 in the number 2 business." The firm is expected to pay a $2.50 dividend at year end (D1 = $2.50), the dividend is expected to grow at a constant rate of 5.50% indefinately, and the common stock currently sells for $52.50 a share. The before-tax cost of debt is 7.50%, and the tax rate is 40%. The capital structure consists of 45% debt and 55% common equity. Required:
What is the company's WACC if all the equity used is from retained earnings?