(Answered) Firm marginal cost of capital at a total investment

Finance

Problem: Marginal Incorporated (MI) has determined that its before-tax cost of debt is 9.0%. Its cost of preferred stock is 13.0%. Its cost of internal equity is 18.0%, and its cost of external equity is 20.0%. Currently, the firm's capital structure has $324 million of debt, $60 million of preferred stock, and $216 million of common equity. The firm's marginal tax rate is 35%. The firm is currently making projections for the next period. Its managers have determined that the firm should have $82 million available from retained earnings for investment purposes next period.

Required:

Question: What is the firm's marginal cost of capital at a total investment level of $164 million? Support your statements with examples

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