AllCity, Inc., is financed 35% with debt, 6% with preferred stock, and 59% with common stock. Its

Question:

AllCity, Inc., is financed 35% with debt, 6% with preferred stock, and 59% with common stock. Its pretax cost of debt is 6.5%, its preferred stock pays an annual dividend of $2.51 and is priced at $28. It has an equity beta of 1.11. Assume the risk-free rate is 2.1%, the market risk premium is 6.8% and AllCity’s tax rate is 25%. What is its after-tax WACC?

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