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eBook Olsen Outfitters Inc. believes that its optimal capital structure consists of 60% common equity and 40% debt, and its tax rate is 25%.
eBook Olsen Outfitters Inc. believes that its optimal capital structure consists of 60% common equity and 40% debt, and its tax rate is 25%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $3 million of retained earnings with a cost of rs 13%. New common stock in an amount up to $9 million would have a cost of re = 15.0%. Furthermore, Olsen can raise up to $3 million of del at an interest rate of rd = 11% and an additional $4 million of debt at ra 13%. The CFO estimates that a proposed expansion would require an investment of $6.0 million. What is the WACC for the last dol rd raised to complete the expansion? Round your answer to two decimal places. %
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