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9. Problem 10.10 (WACC) eBook Olsen Outfitters Inc. believes that its optimal capital structure consists of 65% common equity and 35% debt, and its
9. Problem 10.10 (WACC) eBook Olsen Outfitters Inc. believes that its optimal capital structure consists of 65% common equity and 35% debt, and its tax rate is 25%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $1 million of retained earnings with a = 9% and an additional $6 million of debt at ra = 12%. The CFO estimates that 14.0%. Furthermore, Olsen can raise up to $3 million of debt at an interest rate of rd cost of rs = 12%. New common stock in an amount up to $8 million would have a cost of re = a proposed expansion would require an investment of $3.8 million. What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places. % Save &. Continue
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