Transcribed Image Text
Olsen Outfitters Inc. believes that its optimal capitalstructure consists of 50% common equity and 50% debt, and its taxrate is 40%. Olsen must raise additional capital to fund itsupcoming expansion. The firm will have $3 million of retainedearnings with a cost of rs = 15%. New common stock in an amount upto $10 million would have a cost of re = 19%. Furthermore, Olsencan raise up to $4 million of debt at an interest rate of rd = 9%and an additional $4 million of debt at rd = 12%. The CFO estimatesthat a proposed expansion would require an investment of $7.4million. What is the WACC for the last dollar raised to completethe expansion? Round your answer to two decimal places.
Other questions asked by students
Biology
Accounting
Chemistry
Basic Math
Algebra
Accounting
Accounting