Question
s target capital structure consists of 40% debt and 60% common equityand its federal-plus-state tax rate is 40%. The firm must raise additional capital to
s target capital structure consists of 40% debt and 60% common equityand its federal-plus-state tax rate is 40%. The firm must raise additional capital to fund its latest expansion. The company will have $3million of retained earnings with acost of 12%. New common stock in an amount of $9million would have a cost of 15%. In addition, Mirha can raise up to $4 million of debt at an interest rate of 10% and an additional $5 million at a rate of 12%. Mirha Corps CFO expects that the proposed expansion will required an investment of $7.2 million. What is the wacc for this expansion projectif Mirha expects to maintain its target capital structure?
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