Calculating the Cost of Equity Capital and the WACC In this problem, you first need to calculate the cost of equity using the DCF approach. Then use the rest of the information to find the WACC: Dashy-Paints Corporation has a target capital structure of 45% debt, 15% preferred stock, and 40% common stock. Its before-tax cost of debt is 8%, preferred stock cost is 9.5%, and its marginal tax rate is 40%. The current stock price is $22.00. The last dividend was at 2.25, and is expected to grow at a 5% constant rate. What is the firm's WACC? 9.88% 11.32% 8.72% 12.04%