WACC

Olsen Outfitters Inc. believes that its optimal capital structure consists of $65\%$ common equity and $35\%$ debt, and its tax rate is $40\%.$ Olsen must raise additional capital to fund its upcoming expansion. The firm will have $$3$ million of retained earnings with a cost of $r_s=15\%.$ New common stock in an amount up to $$7$ million would have a cost of $r_e=18\%.$ Furthermore, Olsen can raise up to $$3$ million of debt at an interest rate of $rd=10\%$ and an additional $$4$ million of debt at $rd=11\%.$ The CFO estimates that a proposed expansion would require an investment of $$8\mathrm{.}4$ million. What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places.

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WACC

Olsen Outfitters Inc. believes that its optimal capital structure consists of $65\%$ common equity and $35\%$ debt, and its tax rate is $40\%.$ Olsen must raise additional capital to fund its upcoming expansion. The firm will have $$3$ million of retained earnings with a cost of $r_s=15\%.$ New common stock in an amount up to $$7$ million would have a cost of $r_e=18\%.$ Furthermore, Olsen can raise up to $$3$ million of debt at an interest rate of $rd=10\%$ and an additional $$4$ million of debt at $rd=11\%.$ The CFO estimates that a proposed expansion would require an investment of $$8\mathrm{.}4$ million. What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places.

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WACC

Olsen Outfitters Inc. believes that its optimal capital structure consists of $65\%$ common equity and $35\%$ debt, and its tax rate is $40\%.$ Olsen must raise additional capital to fund its upcoming expansion. The firm will have $$3$ million of retained earnings with a cost of $r_s=15\%.$ New common stock in an amount up to $$7$ million would have a cost of $r_e=18\%.$ Furthermore, Olsen can raise up to $$3$ million of debt at an interest rate of $rd=10\%$ and an additional $$4$ million of debt at $rd=11\%.$ The CFO estimates that a proposed expansion would require an investment of $$8\mathrm{.}4$ million. What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places.

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