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Stupid Cost of Debt Question
A companys schedule of the costs of debt and equity shows that additional $ million of debt can be issued at an after tax cost of 3% and additional equity of $9 million at a cost of 6%. The company plans to maintain a capital structure of 30% debt and 70% equity. At what level of new capital financing will the marginal cost of capital change with the issuance of new debt?
A. $3 million
B. $10 million
C. $9 million
D. $12.86
Can someone explain this? Thanks |
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