You have gathered the following information for Frosty Ale, Inc., which has a 40 percent marginal tax rate.
- 2 million common shares outstanding
- 120,000 bonds outstanding
- Current yield to maturity is 7%
- Estimated market risk premium is 6%
- Current common stock price is $25 per share
- Current preferred stock price is $30 per share
- 90,000 preferred shares outstanding
- Estimated beta of stock is 1.2
- 10 year U.S. Treasury yield is 4.8%
- Annual preferred dividend is $3
- Bonds are trading at par
- Bonds have $1,000 face value
What is the firm's weighted average cost of capital (WACC)?