Company has a capital structure of 55% total equity, 35% debt, and 10% common stock Lisa is analyzing a $200 million capital budgeting project and management has estimated the following costs for the capital sources: - Before-tax cost of debt 8% - Cost of external equity 20% - Cost of internal equity 12% - Cost of common stock 9.5% Lisa plans to use $50 million in new retained earnings to assist with financing. Based on the information provided, and using a 25% tax rate, determine the WACC.
Company has a capital structure of 55% total equity, 35% debt, and 10% common stock Lisa is analyzing a $200 million capital budgeting project and management has estimated the following costs for the capital sources: - Before-tax cost of debt 8% - Cost of external equity 20% - Cost of internal equity 12% - Cost of common stock 9.5% Lisa plans to use $50 million in new retained earnings to assist with financing. Based on the information provided, and using a 25% tax rate, determine the WACC.
Chapter11: The Cost Of Capital
Section: Chapter Questions
Problem 13PROB
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Company has a capital structure of 55% total equity, 35% debt, and 10% common stock Lisa is analyzing a $200 million capital budgeting project and management has estimated the following costs for the capital sources:
- Before-tax cost of debt 8%
-
- Cost of internal equity 12%
- Cost of common stock 9.5%
Lisa plans to use $50 million in new
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