The controller of Olaf Corporation wants to establish a minimum rate of return and would like to use a weighted-average cost of capital. Current data about the corporation's financing structure are as follows:
- Debt Financing 40%
- Preferred Stock 30%
- Common Stock 20%
- Retained Earnings 10%
The cost of debt is 4 percent. The dividend rate on the preferred stock issue is 3 percent. The cost of common cost is 2 percent and the cost of retained earnings is 5 percent.Compute the weighted-average cost of capital.