Given the following information, calculate the weighted average cost of capital for Digital Processing Inc. Line up the calculations in the order shown in Table 11-1.
Percent of capital structure:
Preferred stock................ 20%
Common equity............... 40
Debt................................. 40
Additional information:
Corporate tax rate............................. 34%
Dividend, preferred........................... $8.50
Dividend, expected common............. $2.50
Dividend, preferred........................... $105.00
Growth rate....................................... 7%
Bond yield.......................................... 9.5
Flotation cost, preferred.................... $3.60
Price, common................................... $75.00