The Imaginary Products Co. currently has debt with a market value of $300 million outstanding. The debt consists of 10 percent coupon bonds (semiannual coupon payments) which have a maturity of 15 years and are currently priced at $1,440.03 per bond. The firm also has an issue of 4 million preferred shares outstanding with a market price of $14.00 per share. The preferred shares pay an annual dividend of $1.20. Imaginary also has 12 million shares of common stock outstanding with a price of $20.00 per share. The firm is expected to pay a $2.20 common dividend one year from today, and that dividend is expected to increase by 5 percent per year forever. Imaginary is subject to a 40 percent marginal tax rate.

What is the after-tax cost of debt? And what is WACC?