Marginal Incorporated (MI) has determined that its after-tax cost of debt is 10.0%. Its cost of...

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Marginal Incorporated (MI) has determined that its after-taxcost of debt is 10.0%. Its cost of preferred stock is 14.0%. Itscost of internal equity is 16.0%, and its cost of external equityis 21.0%. Currently, the firm's capital structure has $372 millionof debt, $30 million of preferred stock, and $198 million of commonequity. The firm's marginal tax rate is 25%. The firm is currentlymaking projections for the next period. Its managers havedetermined that the firm should have $70 million available fromretained earnings for investment purposes next period. What is thefirm's marginal cost of capital at a total investment level of $255million?

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Current Capital Structure 372 million Debt 30 million Preferred Stock 198 million Common Stock Total Capital 372 30 198 600 million Debt Proportion 372600 062 Preferred Stock 30360 005 See Answer

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Marginal Incorporated (MI) has determined that its after-taxcost of debt is 10.0%. Its cost of preferred stock is 14.0%. Itscost of internal equity is 16.0%, and its cost of external equityis 21.0%. Currently, the firm's capital structure has $372 millionof debt, $30 million of preferred stock, and $198 million of commonequity. The firm's marginal tax rate is 25%. The firm is currentlymaking projections for the next period. Its managers havedetermined that the firm should have $70 million available fromretained earnings for investment purposes next period. What is thefirm's marginal cost of capital at a total investment level of $255million?