Mirha expects to maintain its target capital structure

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Mirha Corp’s target capital structure consists of 40% debt and 60% common equity and its federal-plus-state tax rate is 40%. The firm must raise additional capital to fund its latest expansion. The company will have $3 million of retained earnings with a cost of 12%. New common stock in an amount of $9 million would have a cost of 15%. In addition, Mirha can raise up to $4 million of debt at an interest rate of 10% and an additional $5 million at a rate of 12%. Mirha Corp’s CFO expects that the proposed expansion will required an investment of $7.2 million. What is the wacc for this expansion project if Mirha expects to maintain its target capital structure?

Reference no: EM131510751

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