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Show complete formula work please Olsen Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax
Show complete formula work please
Olsen Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax rate is 25%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $2 million of retained earnings with a cost of rs=11%. New common stock in an amount up to $7 million would have cost re=12.0%. Furthermore, Olsen can raise up to $4 million of debt at an interest rate of rd=9% and an additional $3 million of debt at rd=11%. The CFO estimates that a proposed expansion %Step by Step Solution
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