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Lonestar Inc. is planning to expand operations into the Central United States and needs to raise funds for the expansion. The firm's investors require a

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Lonestar Inc. is planning to expand operations into the Central United States and needs to raise funds for the expansion. The firm's investors require a 14 percent rate of return, the firm's bonds have a yield to maturity of 7 percent, and the firm's marginal tax rate is 21 percent. The firm's balance sheet at the end of 2019 appears below. It is important to note that the firm's bonds were selling at par value and its stock was selling for a price of 2.25 times its book value at the end of 2019. Table 2: Balance Sheet for 2019 Assets Debt & Equity Cash $ 2,010,000 Accounts Receivable 4,580,000 Inventories 1,540,000 Total current assets 8,130,000 Long-term debt $ 8,141,000 Net property, plant, & 32,575,000 32,564,000 Common equity equipment Total assets 40,705,000 Total debt & equity 40,705,000 A. Complete the following table to determine Lonestar's capital structure and the weighted average cost of capital (WACC). (7 points) Table 3: WACC for Initial Conditions Market Value Balance Sheet Component Proportion Product After-tax Cost Long-term debt Common equity WACC = Totals

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