You are a financial manager of the following firm. The firms cost of internal common equity is
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- You are a financial manager of the following firm. The firm’s cost of internal common equity is 15%. The cost of external common equity is 20%. The cost of preferred stock is 12%. The firm has $400,000 in retained earnings. It has a line of credit up to $4,500,000 at a before-tax cost of debt of 6%, after which the before-tax cost of debt increases to 10%. The firm is in the 35% tax bracket. The firm above determines it will finance all projects using 10% common equity and 20% preferred stock and 70% debt. Given the information above: If the firm finances its capital budget out of a new common stock issue and borrows $3,500,000 then the WACC of the next dollar of capital raised is ___ %.
Related Book For
Financial Reporting and Analysis
ISBN: 978-0078025679
6th edition
Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon
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