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What is the wacc for the last dollar raised to complete

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Point 1: Olsen Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax rate is 40%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $1 million of retained earnings with a cost of rs = 10%. New common stock in an amount up to $6 million would have a cost of re = 13.0%. Furthermore, Olsen can raise up to $3 million of debt at an interest rate of rd = 9% and an additional $6 million of debt at rd = 12%. The CFO estimates that a proposed expansion would require an investment of $8.5 million.

Question 1: What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places.

Reference no: EM132499265

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