1. Estimate the firm's weights of debt, preferred stock, and common stock using the firm's balance sheet (book value).
2. Estimate the firm's weights of debt, preferred stock, and common stock using the market value of each capital component.
3. Estimate the firm's before-tax and after-tax component cost of debt; (Note: If the information about the current corporate tax rate is not available, you need to estimate the tax rate based on the historical tax payments).
4. -Estimate the firm's component cost of preferred stock if the firm has issued preferred stocks.
5. -Use three approaches (CAPM, DCF, bond-yield-plus-risk-premium) to estimate the component cost of common equity for the firm.
6. -Calculate the firm's weighted average cost of capital (WACC) using the market-based capital weights.