10-7

AllCity, Inc., is financed 43% with debt, 10% with preferred stock, and 47% with common stock. Its pretax cost of debt is 6.3%, its preferred stock pays an annual dividend of $2.52 and is priced at $27. It has an equity beta of 1.13. Assume the risk-free rate is 1.7%, the market risk premium is 6.7% and AllCity's tax rate is 25%. What is its after-tax WACC?Note: Assume that the firm will always be able to utilize its full interest tax shield.