AllCity, Inc., is financed 43% with debt, 11% with preferred stock, and 46% with common stock....

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AllCity, Inc., is financed 43% with debt, 11% with preferred stock, and 46% with common stock. Its cost of debt is 5.7%, its

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Answer 1

Answer #1

After Tax cost of Debt =Cost of debt [1-tax]

= 5.7 [1-.35]

= 5.7 *.65

= 3.705%

Cost of preferred stock = Annual dividend /price

= 2.45 / 30

= .0816667 or 8.16667%

Cost of equity = Risk free rate + [Beta *market risk premium]

= 1.6 + [1.19 *6.7]

= 1.6 + 7.973

= 9.573%

	weight	cost	Weight *cost
Debt	43%	3.705%	1.59315
Preferred stock	11%	8.16667%	.89833
common stock	46%	9.573%	4.40358


WACC			6.90%

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Answer 2

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