Industrial Machineries Corporation (MIMC) has a pre-tax cost of debt of 7.6 percent, beta of 1.5 and cost of preferred stock of 8.5 percent.
MIMC has 220.000 shares of common stock outstanding, which currently is traded at a market price of $27 per share in the Frankfurt Stock Exchange(FSE).
There are 25,000 shares of preferred stock outstanding at a market price of $41 per share.
The bond issues have face value of $ 550,000 and currently the issues are traded at $556,600 in FSE bond market.
Market risk premium is 7.13 percent and risk free rate is 3.6 percent. The MIMC ‘s tax rate is 37 percent. What is your best estimate of MIMC's WACC?
Please show your work step by step. You must explain, in 4 lines, how you calculate WACC for MIMC.