# After-tax cost of debt

Knowing this, I figured the following:
Micro Spinoffs also has preferred stock outstanding. The stock pays a dividend of \$4 per share, and the stock sells for \$40. What is the cost of preferred stock?

Companies can also sell preferred stock. This kind of stock pays a fixed dividend into perpetuity, so its “cost” can be calculated by r= div/Price. (or Price = div/r). This is the “cost” of the company for selling these shares of preferred stock.
r = DIV/P0 = \$4/\$40 = 0.10 = 10%

I need to find the following:

1. 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?

also, this one as well:

2. 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. If the firm’s tax bracket is 35 percent, what is its after-tax cost of debt?

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