Global Technology’s capital structure is as follows: Debt 15 % Preferred stock 5

Question

Global Technology’s capital structure is as follows:

Debt 15 %

Preferred stock 50

Common equity 35

The aftertax cost of debt is 8.00 percent; the cost of preferred stock is 12.00 percent; and the cost of common equity (in the form of retained earnings) is 15.00 percent.

Calculate the Global Technology’s weighted cost of each source of capital and the weighted average cost of capital. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)

Weighted Cost

Debit- %?

Preferred stock-%?

Common stock- %?

Weighted average cost of captial- %?

Explanation / Answer

Debt (0.15*0.08)=1.2% Preferred stock (0.5*12)=6% Common equity (0.35*15)=5.25% WACC 12.45%

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