lsen Outfitters Inc. believes that its optimal capital structure consists of 55% common equity and 45% debt, and its tax rate is 40%. Olsen must raise additional capital to fund its upcoming xpansion. The firm will have $3 million of retained earnings with a cost of r; = 12%. New common stock in an amount up to $9 million would have a cost of re = 15.0%. Furthermore, Olsen can aise up to $4 million of debt at an interest rate of ra = 10% and an additional $5 million of debt at ra = 13%. The CFO estimates that a proposed expansion would require an investment of $7.0 hillion. What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places.

lsen Outfitters Inc. believes that its optimal capital structure consists of 55% common equity and 45% debt, and its tax rate is 40%. Olsen must raise additional capital to fund its upcoming xpansion. The firm will have $3 million of retained earnings with a cost of r; = 12%. New common stock in an amount up to $9 million would have a cost of re = 15.0%. Furthermore, Olsen can aise up to $4 million of debt at an interest rate of ra = 10% and an additional $5 million of debt at ra = 13%. The CFO estimates that a proposed expansion would require an investment of $7.0 hillion. What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Olsen Outfitters Inc. believes that its optimal capital structure consists of 55% common equity and 45% debt, and its tax rate is 25%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $2 million of retained earnings with a cost of rs = 13%. New common stock in an amount up to $9 million would have a cost of re = 15.5%. Furthermore, Olsen can raise up to $3 million of debt at an interest rate of rd = 11% and an additional $3 million of debt at rd = 12%. The CFO estimates that a proposed expansion would require an investment of $5.6 million. What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places. %
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hi, this is my finance question. i need answer asap.
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