3. (20 points) Market value of a company's debt is $300,000, preferred stock is $100,000 and common stock is $600,000. The risk-free rate in the economy is 4% and expected market risk premium is 10%. In addition, the beta of the company's common stock is 1.2. If the cost of preferred stock is 8% and the cost of debt (before-tax) is 5%, what is the company's WACC? Tax rate is 40%. 1