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WACCKlose Outfitters Inc. believes that its optimal capital structure consists of 60% common equity and 40%
WACC Klose Outfitters Inc. believes that its optimal capital structure consists of 60% common equity and 40%
debt, and its tax rate is 40%. Klose must raise additional capital to fund its upcoming expansion. The firm will have $2 million of retained earnings with a cost of rs 12%. New common stock in an amount up to $6 million would have a cost of re 15%. Furthermore, Klose can raise up to $3 million of debt at an interest rate of rd 10% and an additional $4 million of debt at rd 12%. The CFO estimates that a proposed expansion would require an investment of $5 9 million. What is the WACC for the last dollar raised to complete the expansion?
