Question

In: Finance

Olsen Outfitters Inc. believes that its optimal capital structure consists of 65% common equity and 35%...

Olsen Outfitters Inc. believes that its optimal capital structure consists of 65% common equity and 35% debt, and its tax rate is 40%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $1 million of retained earnings with a cost of rs = 12%. New common stock in an amount up to $6 million would have a cost of re = 13.0%. Furthermore, Olsen can raise up to $4 million of debt at an interest rate of rd = 11% and an additional $3 million of debt at rd = 15%. The CFO estimates that a proposed expansion would require an investment of $3.3 million. What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places.

Solutions

Expert Solution

Sol:

WACC = 10.44

Calculations:

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

Olsen Outfitters Inc. believes that its optimal capital structure consists of 35% common equity and 65%...
Olsen Outfitters Inc. believes that its optimal capital structure consists of 35% common equity and 65% debt, and its tax rate is 25%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $1 million of retained earnings with a cost of rs = 12%. New common stock in an amount up to $10 million would have a cost of re = 13.0%. Furthermore, Olsen can raise up to $4 million of debt at an interest...
Olsen Outfitters Inc. believes that its optimal capital structure consists of 65% common equity and 35%...
Olsen Outfitters Inc. believes that its optimal capital structure consists of 65% common equity and 35% debt, and its tax rate is 40%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $2 million of retained earnings with a cost of rs = 13%. New common stock in an amount up to $9 million would have a cost of re = 17%. Furthermore, Olsen can raise up to $2 million of debt at an interest...
Olsen Outfitters Inc. believes that its optimal capital structure consists of 65% common equity and 35%...
Olsen Outfitters Inc. believes that its optimal capital structure consists of 65% common equity and 35% debt, and its tax rate is 40%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $1 million of retained earnings with a cost of rs = 15%. New common stock in an amount up to $10 million would have a cost of re = 18%. Furthermore, Olsen can raise up to $3 million of debt at an interest...
WACC Olsen Outfitters Inc. believes that its optimal capital structure consists of 65% common equity and...
WACC Olsen Outfitters Inc. believes that its optimal capital structure consists of 65% common equity and 35% debt, and its tax rate is 40%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $3 million of retained earnings with a cost of rs = 12%. New common stock in an amount up to $6 million would have a cost of re = 16%. Furthermore, Olsen can raise up to $4 million of debt at an...
Olsen Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30%...
Olsen Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax rate is 40%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $3 million of retained earnings with a cost of rs = 12%. New common stock in an amount up to $10 million would have a cost of re = 16%. Furthermore, Olsen can raise up to $4 million of debt at an interest...
Olsen Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30%...
Olsen Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax rate is 40%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $4 million of retained earnings with a cost of rs = 10%. New common stock in an amount up to $7 million would have a cost of re = 11.5%. Furthermore, Olsen can raise up to $3 million of debt at an interest...
Olsen Outfitters Inc. believes that its optimal capital structure consists of 55% common equity and 45%...
Olsen Outfitters Inc. believes that its optimal capital structure consists of 55% common equity and 45% debt, and its tax rate is 40%. Olsen must raise additional capital to funds its upcoming expansion. The firm will have $4 million of retained earnings with a cost of rs = 11%. New common stock in an amount up to $8 million would have a cost of re = 12.5%. Furthermore, Olsen can raise up to $4 million of debt at an interest...
Olsen Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30%...
Olsen Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax rate is 40%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $1 million of retained earnings with a cost of rs = 13%. New common stock in an amount up to $9 million would have a cost of re = 16%. Furthermore, Olsen can raise up to $3 million of debt at an interest...
Olsen Outfitters Inc. believes that its optimal capital structure consists of 40% common equity and 60%...
Olsen Outfitters Inc. believes that its optimal capital structure consists of 40% common equity and 60% debt, and its tax rate is 25%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $1 million of retained earnings with a cost of rs = 12%. New common stock in an amount up to $7 million would have a cost of re = 13.5%. Furthermore, Olsen can raise up to $4 million of debt at an interest...
Olsen Outfitters Inc. believes that its optimal capital structure consists of 60% common equity and 40%...
Olsen Outfitters Inc. believes that its optimal capital structure consists of 60% common equity and 40% debt, and its tax rate is 40%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $3 million of retained earnings with a cost of rs = 12%. New common stock in an amount up to $9 million would have a cost of re = 15.0%. Furthermore, Olsen can raise up to $4 million of debt at an interest...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT