The beta corporation asks you to determine its marginal cost of capital. Beta’s current capital structure consists of 45% debt, 15% preferred stock and 40% common equity. The separate marginal costs of the various components of the capital structure are as follows: debt, after-tax 5.0 percent; preferred stock, 9 percent; retained earnings, 12 percent; and new common stock, 13.5 percent. If beta has 15 million investible retained earnings, and Beta has an opportunity to invest in an attractive project that costs 60million, what is the marginal cost of capital of Beta Corporation? 9.88% 8.63% 9.00% 8.40%

The beta corporation asks you to determine its marginal cost of capital. Beta’s current capital structure consists of 45% debt, 15% preferred stock and 40% common equity. The separate marginal costs of the various components of the capital structure are as follows: debt, after-tax 5.0 percent; preferred stock, 9 percent; retained earnings, 12 percent; and new common stock, 13.5 percent. If beta has 15 million investible retained earnings, and Beta has an opportunity to invest in an attractive project that costs 60million, what is the marginal cost of capital of Beta Corporation? 9.88% 8.63% 9.00% 8.40%

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter11: The Cost Of Capital

Section: Chapter Questions

Problem 15PROB

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