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Donner inc will finance a proposed investment by issuing

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Donner Inc will finance a proposed investment by issuing new securities while maintaining its optimal capital structure of 60% debt and 40% equity. The firm can issue bonds at a price of $950.00 before the $15 flotation costs. The 10-year bonds will have an annual coupon rate of 8% and a face value of $1000. The company can issue new equity at a before -tax cost of 16% and its marginal tax rate is 34%. What is the appropriate cost of capital to use in analyzing this project.

Reference no: EM13623727

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