Great Eats needs $2,000,000 to finance a new restaurant in Mytown. The project will be funded from the following sources.

Great Eats' effective tax rate is 34 percent with taxes paid annually. Current stock price is \(\$ 15 /\) share. Management determines MARR based on the weighted average cost of capital plus a constant. Currently the constant is 4 percent (i.e., if \(W A C C\) is 6 percent, MARR is 10 percent). Determine the appropriate value of MARR for evaluating the project.

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Source Funding Cost of Funding Loan $700.000 8%/yr/mo Bonds $500,000 6%/yr/qtr Common Stock $400,000 $0.75 dividend/yr Retained Earnings $400,000 5%/yr stock price growth rate