10-8

Pfd Company has debt with a yield to maturity of 7.6%, a cost of equity of 14.1%, and a cost of preferred stock of 9.6%. The market values of its debt, preferred stock, and equity are $12.2 million, $2.5 million, and $15.9 million, respectively, and its tax rate is 21%. What is this firm's after-tax WACC? Note: Assume that the firm will always be able to utilize its full interest tax shield.