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AllCity, Inc., is financed 35% with debt, 15% with preferred stock, and 50% with common stock. Its pretax cost of debt is 6.1%, its preferred
AllCity, Inc., is financed 35% with debt, 15% with preferred stock, and 50% with common stock. Its pretax cost of debt is 6.1%, its preferred stock pays an annual dividend of $2.54 and is priced at $34. It has an equity beta of 1.1. Assume the risk-free rate is 1.8%, the market risk premium is 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.
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