Present common stock beta is 1.26 with a present capital structure of the firm of $50mill in debt with a pre-tax cost of 6.75% $10 mill in preferred stock at
a cost of 8.5% and $140 mill in common stock. A $30 mill project under consideration will be financed with $20 mill in new debt that can be issued at a
pre-tax cost of 7.5% and $10 mill in new preferred stock that can be issued at a cost of 9.25%. The change in capital structure and asset risk is estimated to
change the common stock beta to 1.44. The risk free rate of return is 3.5% the expected return on the market portfolio of assets is 10.5% and the tax rate is
40%. What is the marginal cost of capital for the project?