Bargeron Corporation has a target capital structure of 60 percent common stock, 5 percent preferred stock, and 35 percent debt. Its cost of equity is 13 percent, the cost of preferred stock is 6 percent, and the pretax cost of debt is 7.7 percent. The relevant tax rate is 35 percent.
A.What is the company’s WACC?
b. What is the aftertax cost of debt?