Question
1. Marginal Incorporated (MI) has determined that its after-tax cost of debt is 5.0% for the first $58 million in bonds it issues, and 8.0%
1. Marginal Incorporated (MI) has determined that its after-tax cost of debt is 5.0% for the first $58 million in bonds it issues, and 8.0% for any bonds issued above $58 million. Its cost of preferred stock is 15.0%. Its cost of internal equity is 17.0%, and its cost of external equity is 21.0%. Currently, the firm's capital structure has $530 million of debt, $150 million of preferred stock, and $320 million of common equity. The firm's marginal tax rate is 25%. The firm's managers have determined that the firm should have $58 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 $145 million?
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11.93%
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13.21%
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10.34%
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11.62%
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12.15%
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10.87%
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2. Marginal Incorporated (MI) has determined that its before-tax cost of debt is 5.0% for the first $58 million in bonds it issues, and 8.0% for any bonds issued above $58 million. Its cost of preferred stock is 15.0%. Its cost of internal equity is 17.0%, and its cost of external equity is 21.0%. Currently, the firm's capital structure has $530 million of debt, $150 million of preferred stock, and $320 million of common equity. The firm's marginal tax rate is 25%. The firm's managers have determined that the firm should have $58 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 $272 million?
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10.34%
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10.87%
|
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9.68%
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10.96%
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13.21%
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11.93%
|
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12.15%
|
|
11.62%
|
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