Problem 12-18 Calculating the WACC [LO 3]

You are given the following information concerning Parrothead Enterprises:

Debt: 9,800 7.3 percent coupon bonds outstanding, with 22 years to maturity and a quoted price of 106.00. These bonds pay interest semiannually.

Common stock: 265,000 shares of common stock selling for $65.30 per share. The stock has a beta of .93 and will pay a dividend of $3.50 next year. The dividend is expected to grow by 5.3 percent per year indefinitely.

Preferred stock: 8,800 shares of 4.65 percent preferred stock selling at $94.80 per share.

Market: An expected return of 11.2 percent, a risk-free rate of 5.15 percent, and a 38 percent tax rate.

What is the firm's cost of each form of financing? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimalplaces, e.g., 32.16.)

Aftertax cost of debt %

Cost of preferred stock %

Cost of equity %

Calculate the WACC for the company. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimalplaces, e.g., 32.16.)

WACC %