Raise additonal capital to fund its upcoming expansion

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Reference no: EM131359378

Olsen Outfitters Inc. believes that its optimal capital structures consists of 60% common equity ahd 40% debt, and its tax rate is 40%. Olsen must raise additonal capital to fund its upcoming expansion. The firm will have $2 million of retained earnings with a cost of r?s ?= 12%, New common stock in an amount up to $7 million would have a cost of r?e? ?= 16%. Furthermore, Olsen can raise up to $2 million of det at an interest rate of rd? = 11%, and an additoanl $3 million of debt at rd? = 13%. The CFO estiamtes that a proposed expansion would require an investment of $4.5 million. What is the WACC for the last dollar raised to complete the expanison? Round you answe to two decimal places.

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Reference no: EM131359378

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