Problem: Global Technology's capital structure is as follows:
Debt . . . . . . . . . . . . . . 35%
Preferred stock . . . . . . 15
Common equity . . . . . 50
The aftertax cost of debt is 6.5 percent; the cost of preferred stock is 10 percent; and the cost of common equity (in the form of retained earnings) is 13.5 percent.
Calculate Global Technology's weighted average cost of capital.