Problem:
Micro Spinoffs, Inc., issued 20-year debt a year ago at par value with a coupon rate of 8 percent, paid annually. Today, the debt is selling at $1,050. The firm's tax bracket is 35 percent.
Micro Spinoffs also has preferred stock outstanding. The stock pays a dividend of $4 per share, and the stock sells for $40.
Suppose Micro Spinoffs's cost of equity is 12.0 percent. What is its WACC if equity is 50 percent, preferred stock is 20 percent, and debt is 30 percent of total capital?