Marginal Incorporated (MI) has determined that its before-tax cost of debt is 6.0% for the...
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Marginal Incorporated (MI) has determined that its before-tax cost of debt is 6.0% for the first $99 million in bonds it issues, and 10.0% for any bonds issued above $99 million. Its cost of preferred stock is 13.0%. Its cost of internal equity is 17.0%, and its cost of external equity is 19.0%. Currently, the firm's capital structure has $325 million of debt, $35 million of preferred stock, and $140 million of common equity. The firm's marginal tax rate is 45%. The firm's managers have determined that the firm should have $71 million available from retained earnings for investment purposes next period. What is the firm's marginal cost of capital at a total investment level of $203 million? 7.82%9.81%9.25%8.38%12.73%12.17%9.57%10.13%
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