If a firm has preferred stock, the after-tax weighted average cost of capital (WACC) equals

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The after-tax WACC is calculated as the weighted average of the after-tax cost of debt, the cost of preferred stock, and the cost of equity. The after-tax cost of debt is rD(1 - TC), where rD is the cost of debt and TC is the corporate tax rate. The cost of preferred stock is rP, and the cost of equity is rE. The weights are the proportions of each type of financing in the firm's capital structure.

If a Firm Has Preferred Stock, the After-Tax Weighted Average