Owens Enterprises is in the process of determining its capital budget for the next fiscal year. The firm's current capital structure, which it considers to be optimal, is contained in the following balance sheet:

Through discussions with the firm's investment bankers, lead bank, and financial officers, the following information has been obtained:
The firm expects net income from this year to total $80 million. The firm intends to maintain its dividend policy of paying 42.25 percent of earnings to stockholders.
The firm can borrow $18 million from its bank at a 13 percent annual rate.
Any additional debt can be obtained through the issuance of debentures (at par) that carry a 15 percent coupon rate.
The firm currently pays $4.40 per share in dividends (D0). Dividends have grown at a 5 percent rate in the past. This growth is expected to continue.
The firm's common stock currently trades at $44 per share. If the firm were to raise any external equity, the newly issued shares would net the company $40 per share.
The firm is in the 40 percent marginal tax bracket.
Compute Owens' marginal cost of capitalschedule.

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Balance Sheet Current assets s 40.000.000 Accounts payable Fixed assets 400,000,000 Other current labilities Total assets $44000000 Long-term debit $ 20,000,000 0,000,000 123,000,000 5.500,000 51,000,000 Long-term debt Common stock at par Paid in capital in excess of par Retained earnings Total liablilties and stockholders equity