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What is the firm marginal cost of capital

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Reference no: EM133006218

Question - Marginal Incorporated (MI) has determined that its before-tax cost of debt is 7.0%. Its cost of preferred stock is 15.0%. Its cost of internal equity is 19.0%, and its cost of external equity is 24.0%. Currently, the firm's capital structure has $470 million of debt, $90 million of preferred stock, and $440 million of common equity. The firm's marginal tax rate is 25%. The firm is currently making projections for the next period. Its managers have determined that the firm should have $58 million available from retained earnings for investment purposes next period. What is the firm's marginal cost of capital at a total investment level of $181 million?

Reference no: EM133006218

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