What is the wacc for the last dollar raised to complete

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Reference no: EM133435988

Question: Olsen Outfitters Inc. believes that its optimal capital structure consists of 45% common equity and 55% 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 r5 - 10%. New common stock in an amount up to $10 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 $5 million of debt at rd = 13%. The CFO estimates that a proposed expansion would require an investment of $4.9 million. What is the WACC for the last dollar raised to complete the expansion?

Reference no: EM133435988

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