Question: please show me how to solve this problem. A Corporation is estimating its WACC. Its target capital structure is 20% debt, 20% preferred stock, and

please show me how to solve this problem.

A Corporation is estimating its WACC. Its target capital structure is 20% debt, 20% preferred stock, and 60% common equity. Its bonds have a 10% coupon, paid semiannually, a current maturity of 20 years, and sell for $850. The firm could sell, at par, $100 preferred stock which pays a 12% annual dividend. The company's beta is 1.2, the risk-free rate is 10%, and the market risk premium is 5%. The firm's marginal tax rate is 40%. What is the company's WACC component cost of equity (r_s)?

The Answer is 16.0%

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