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20.) A firm has a lender lined up to provide funding. Bank A charges an interest rate of 8% with a $450,000 limit. Bonds could

20.) A firm has a lender lined up to provide funding. Bank A charges an interest rate of 8% with a $450,000 limit. Bonds could also be issued at a 10% yield. The firm has 435,000 of available retained earnings at a cost of 11.6%. Preferred stock can be issued at 11% and new common shares can be issued at 12%. If the tax rate is 41%, determine the second WACC in the MCC schedule. (capital structure: 40% debt, 10% preferred, and 50% common equity)

9.46%

9.95%

10.27%

8.99%

none of the above

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