Question: AllCity, Inc., is financed 45 % 45% withdebt, 12 % 12% with preferredstock, and 43 % 43% with common stock. Its cost of debt is

AllCity, Inc., is financed 45 %

45% withdebt, 12 %

12% with preferredstock, and 43 %

43% with common stock. Its cost of debt is 6.5 %

6.5%, its preferred stock pays an annual dividend of $ 2.47

$2.47 and is priced at $ 31

$31. It has an equity beta of 1.12

1.12. Assume therisk-free rate is 1.8 %

1.8%, the market risk premium is 6.8 %

6.8% andAllCity's tax rate is 35 %

35%. What is itsafter-tax WACC?

Note: Assume that the firm will always be able to utilize its full interest tax shield.

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