What is the wacc for the last dollar

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Olsen Outfitters Inc. believes that its optimal capital structure consists of 55% common equity and 45% debt, and its tax rate is 25%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $2 million of retained earnings with a cost of rs = 13%. New common stock in an amount up to $10 million would have a cost of re = 14.0%. Furthermore, Olsen can raise up to $4 million of debt at an interest rate of rd = 11% and an additional $5 million of debt at rd = 13%. The CFO estimates that a proposed expansion would require an investment of $6.0 million. What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places.

Reference no: EM133068948

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