Question: Mosa Media is evaluating a project to help increase saies. The project costs 5450,000 and has an laR equal to 13 percent. The project is
Mosa Media is evaluating a project to help increase saies. The project costs 5450,000 and has an laR equal to 13 percent. The project is divisible, which means any portion can be purchased. Mesa can raise up to $56,000 in new debt at a before-tax cost (ro) equal to 5 percent; additional debt will cost 7 percent before taxes. Mesa expects to retain 5320,000 of its earnings this year to support the purchase of the project. Mesa's cost of retained earnings is 13 percent, and its cost of new common equity is 16 percent. Its target capital structure consists of 20 percent debt and 30 percent comman equity. If Mesa's marginal tax rate is 40 percent, how much of the project should be purchased? Round your answer to the nearest doliar
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