Question
Can anyone help with this question? I got 10.63% but it says that's wrong. Olsen Outfitters Inc. believes that its optimal capital structure consists of
Can anyone help with this question? I got 10.63% but it says that's wrong.
Olsen Outfitters Inc. believes that its optimal capital structure consists of 50% common equity and 50% debt, and its tax rate is 25%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $2 million of retained earnings with a cost of rs = 13%. New common stock in an amount up to $6 million would have a cost of re= 14.5%. Furthermore, Olsen can raise up to $4 million of debt at an interest rate of rd = 11% and an additional $6 million of debt at rd = 14%. The CFO estimates that a proposed expansion would require an investment of $4.4 million. What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal
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