13.25 WACC for a firm: The Imaginary Products Co. currently has $300 million of market value debt outstanding. The 9 percent coupon bonds (semiannual pay) have a maturity of 15 years and are currently priced at $1,440.03 per bond. The firm also has an issue of 2 million preferred shares outstanding with a market price of $12.00. The preferred shares offer an annual dividend of $1.20. Imaginary also has 14 million shares of common stock outstanding with a price of $20.00 per share. The firm is expected to pay a $2.20 common dividend one year from today, and that dividend is expected to increase by 5 percent per year forever. If Imaginary is subject to a 40 percent marginal tax rate, then what is the firm's weighted average cost of capital? Capital component Bonds Preffered stock Common stock Number outstanding Current price 300,000 1,440.03 2,000,000 $ 12.00 14,000,000 $ 20.00 9% 15 Coupon rate on debt Coupon frequency (per year) Bond maturity (years) Preferred dividend (annual) Expected dividend on common (D) Constant annual dividend growth rate (fore Marginal tax rate $1.20 $2.20 5% 40% Weight After-tax cost Weighted Cost (%) Capital componen Market Value Bonds Preferred stock Common stock Total capital ( market value) WACC