Corporate Finance【Reading 37】Sample
A company is planning a $50 million expansion. The expansion is to be financed by selling $20 million in new debt and $30 million in new common stock. The before-tax required return on debt is 9% and the required return for equity is 14%. If the company is in the 40% tax bracket, the marginal weighted average cost of capital is closest to:
(0.4)(9%)(1 - 0.4) + (0.6)(14%) = 10.56% |