AllCity, Inc., is financed 42% with debt, 5% with preferred stock, and 53% with common stock. Its pretax cost of debt is 5.7%, its preferred stock pays an annual dividend of $2.51 and is priced at $27. It has an equity beta of 1.11. Assume the risk-free rate is 2.2%, the market risk premium is 7.3% and AlICity's tax rate is 25%. What is its after-tax WACC? Note: Assume that the firm will always be able to utilize its full interest tax shield. The WACC is __ % ? (Round to two decimal places.)

AllCity, Inc., is financed 42% with debt, 5% with preferred stock, and 53% with common stock. Its pretax cost of debt is 5.7%, its preferred stock pays an annual dividend of $2.51 and is priced at $27. It has an equity beta of 1.11. Assume the risk-free rate is 2.2%, the market risk premium is 7.3% and AlICity's tax rate is 25%. What is its after-tax WACC? Note: Assume that the firm will always be able to utilize its full interest tax shield. The WACC is __ % ? (Round to two decimal places.)

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter9: The Cost Of Capital

Section: Chapter Questions

Problem 7P

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