Olsen Outfitters Inc. believes that its optimal capital structure consists of 60% of equity and...

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Olsen Outfitters Inc. believes that its optimal capital structure consists of 60% of equity and 40% of debt, and its tax rate is 30%. Olsen must raise additional capital to fund it upcoming expansion. The firm will have $5 million of retained earnings with a cost of r, 12%. New common stock in an amount up to 10 million would have a costof re-14.5%. Furthermore, Olsen can raise up to $6 million of debt at an interest rateof rd=8% and an additional $7 million of debt at rd=11%. The CFO estimates that aproposed expansion would require an investment of $11 million. What is the WACCfor the last dollar raised to complete the expansion?9.44%10.40%11.90%10.94%

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Olsen Outfitters Inc. believes that its optimal capital structure consists of 60% of equity and 40% of debt, and its tax rate is 30%. Olsen must raise additional capital to fund it upcoming expansion. The firm will have $5 million of retained earnings with a cost of r, 12%. New common stock in an amount up to 10 million would have a costof re-14.5%. Furthermore, Olsen can raise up to $6 million of debt at an interest rateof rd=8% and an additional $7 million of debt at rd=11%. The CFO estimates that aproposed expansion would require an investment of $11 million. What is the WACCfor the last dollar raised to complete the expansion?9.44%10.40%11.90%10.94%