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Saul Goodman and Associates are investing in a major capital budgeting project that will require the expenditure of $20 million. The money will be raised
Saul Goodman and Associates are investing in a major capital budgeting project that will require the expenditure of $20 million. The money will be raised by issuing $8 million of bonds, $2 million of preferred stock, and $10 million of common stock. The company estimates its after-tax cost of debt to be 4.50%, its cost of preferred stock to be 9%, and the cost of common stock to be 14%. The firm has a marginal tax rate of 45%. What is the weighted average cost of capital (WACC) for this project?
10.15% | ||
9.25% | ||
13.75% | ||
9.70% |
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