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AllCity, Inc., is financed 41% with debt, 8% with preferred stock, and 51% with common stock. Its pretax cost of debt is 6.1%, its preferred
AllCity, Inc., is financed 41% with debt, 8% with preferred stock, and 51% with common stock. Its pretax cost of debt is 6.1%, its preferred stock pays an annual dividend of $2.47 and is priced at $26. It has an equity beta of 1.14. Assume the risk-free rate is 2.5%, the market risk premium is 6.8% 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.
The WACC is ___ %
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