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Intel Inc. is considering three investments. The company finances all expansion with 40 percent debt/assets and 60 percent equity capital/assets. The after-tax debt cost is
Intel Inc. is considering three investments. The company finances all expansion with 40 percent debt/assets and 60 percent equity capital/assets. The after-tax debt cost is 8 percent for the first $100,000, after which the cost will be 10 percent. Retained earnings in the amount of $150,000 are available, and the common stockholders required rate of return is 18 percent. If the new stock is issued, the cost will be 22 percent.
Calculate the weighted cost of capital in each of the intervals between the breaks according with the firms weighted marginal cost of capital (MCC) schedule.
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