Olsen Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax rate is 25%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $5 million of retained earnings with a cost of r = 11%. New common stock in an amount up to $7 million would have a cost of r = 14.0%. Furthermore, Olsen can raise up to $3 million of debt at an interest rate of r = 11% and an additional $6 million of debt atr = 12%. The CFO estimates that a proposed expansion would require an investment of $8.0 million. What is the d e WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places. Tride Feedback Incorrect CUYLA DAY YULK cBook Olsen Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax rate is 25%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $5 million of retained earnings with a cost of rs 11%. New common stock in an amount up to $7 million would have a cost of re 14.0%. Furthermore, Olsen can raise up to $3 million of debt at an interest rate of rd 11% and an additional $6 million of debt at rd 12%. The CFO estimates that a proposed expansion would require an investment of $8.0 million. What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places. % 9.36 Hide Feedback Incorrect
Olsen Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax rate is 25%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $5 million of retained earnings with a cost of r = 11%. New common stock in an amount up to $7 million would have a cost of r = 14.0%. Furthermore, Olsen can raise up to $3 million of debt at an interest rate of r = 11% and an additional $6 million of debt atr = 12%. The CFO estimates that a proposed expansion would require an investment of $8.0 million. What is the d e WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places. Tride Feedback Incorrect CUYLA DAY YULK cBook Olsen Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax rate is 25%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $5 million of retained earnings with a cost of rs 11%. New common stock in an amount up to $7 million would have a cost of re 14.0%. Furthermore, Olsen can raise up to $3 million of debt at an interest rate of rd 11% and an additional $6 million of debt at rd 12%. The CFO estimates that a proposed expansion would require an investment of $8.0 million. What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places. % 9.36 Hide Feedback Incorrect
Chapter16: Working Capital Policy And Short-term Financing
Section: Chapter Questions
Problem 11P
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Transcribed Image Text:Olsen Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax
rate is 25%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $5 million of retained
earnings with a cost of r = 11%. New common stock in an amount up to $7 million would have a cost of r = 14.0%.
Furthermore, Olsen can raise up to $3 million of debt at an interest rate of r = 11% and an additional $6 million of debt
atr = 12%. The CFO estimates that a proposed expansion would require an investment of $8.0 million. What is the
d
e
WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places. Tride Feedback
Incorrect
CUYLA DAY YULK
cBook
Olsen Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax rate is 25%. Olsen must raise additional capital to fund its upcoming
expansion. The firm will have $5 million of retained earnings with a cost of rs 11%. New common stock in an amount up to $7 million would have a cost of re 14.0%. Furthermore, Olsen can raise
up to $3 million of debt at an interest rate of rd 11% and an additional $6 million of debt at rd 12%. The CFO estimates that a proposed expansion would require an investment of $8.0 million.
What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places.
%
9.36
Hide Feedback
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