1)AllCity Inc. is financed50% with debt,15% with preferred stock, and 35% with common stock. Its pre-tax cost of debt is 6%; its preferred stock pays an annual dividend of $2.25 and is priced at $32.It has an equity beta of 1.1. Assume the risk-free rate is 2%, the market risk premium is 6%, and AllCity's tax rate is 35%. What is its after-tax WACC?

2)Your company has two divisions: One division sells software and the other division sells computers through a direct sales channel, primarily taking orders over the internet. You have decided that Dell Computer is very similar to your computer division, in terms of both risk and financing. You go online and find the following information: Dell's beta is 1.15

the risk-free rate is 4.3% its market value of equity is $66.7 Billion and it has $706 million worth of debt with a yield to maturity of 5.9%.Your tax rate is 35% and you use a market risk premium of 5.8% in your WACC estimates.

a. What is an estimate of the WACC for your computer sales division?

b. If your overall company WACC is 12.4% and the computer sales division represents 35% of the value of your firm, what is an estimate of the WACC for your software division?

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