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2. A company wishes to raise funds to pursue a new project. The total financed will be 16 million. 4 million from retained earnings, 4
2. A company wishes to raise funds to pursue a new project. The total financed will be 16 million. 4 million from retained earnings, 4 million from bonds, 3 million from common stock and 5 million from a bank loan. The income tax rate is 35%. The company stock price is 40.00 per share with earnings per share of 0.60. The bank loan is at 12% annual compounded monthly. Quarterly bond dividends make an effective 8% per year compounded quarterly, what is the weighted average cost of capital. Show how each term (retained earnings, common stock, bonds and bank loan) is calculated. Show how they are combined for the total
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