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Ewer firm will finance a proposed investment by issuing new securities while maintaining its optimal capital structure of 60% debt and 40% equity. The firm can issue bonds at price of $950.00 before $15 flotation costs. The 10-year bonds will have an annual coupon rate of 8% and face value of $1,000. The company can issue new equity at a before- tax cost of 16% and its marginal tax rate at 34%. What is the appropriate cost of capital use in analyzing this project?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9948970

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