Common stock: The companys 500,000 shares of common stock sell for $25 per share and have a beta of 1.5. The risk-free rate is 4%, and the market risk premium is 8%.

Preferred stock: The companys 100,000 shares of preferred stock pay a $3 annual dividend, and sell for $30 per share.

Debt: A corporation has 10,000 bonds outstanding with 6% coupon rate, semi-annual coupon payments, 8 years to maturity, $1,000 face value, and $1,100 market price.

Assuming a 21% tax rate, what is the companys weighted average cost of capital ?

Step 1: Component costs of capital: RE , RP , RD Step 2: Capital structure weights: E/V , P/V , D/V

Step 3: WACC