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Task1. John is planning a $2 million expansion. The project is expected to yield the internal rate of return of 9.27%. This expansion will be financed, in part, with debt costing 7.00% before taxes. Marginal tax rate is 25%. Preferred stock pays a dividend of $1.98 for each share. The current market price is $12.24 per share. The dividends’ are expected to rise at the yearly rate of 2.00% in the foreseeable future. John's target capital structure is as follows:

Assets

Current Assets                                      $50
Fixed Assets                                          130

Total                                                      180

Liabilities

Current Liabilities                                      20
Long term debt &
Owners Equity                                          64
Preferred stock                                         16
Common stock & Retained Earn                80

Total                                                        180

problem1. What is the weighted average cost of capital?

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M93482

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