You are estimating your firm's WACC to evaluate potential investments. The firm has outstanding preferred stock trading for $40 that pays an annual dividend of $3. You estimate the firm's common equity beta at 1.0 and the expected return on the market at 10%. The risk-free rate is 1%. The firm's current bonds are trading at a YTM of 8% and the firm's marginal tax rate is 35%. The firm's target capital structure is 30% common equity, 8% preferred stock, and 62% debt. What is the firm's WACC? LO1