The XYZ Company is planning a $50 million expansion - 2313

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The XYZ 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 rate of return on debt is 9%, and the required rate of return on equity is 14%. If the company is in the 40% tax bracket, what is the marginal cost of capital?

A.   10.6%

B.   11.5%

C.   14.0%

D.   9.0%

Solution Description

The XYZ Company is planning a $50 million expansion. The expansion is to be financed by selling