Question
A firm has a 30% tax rate, and a 3% cost to issue new common stock....
A firm has a 30% tax rate, and a 3% cost to issue new common stock.
It has determined the optimal capital structure as shown on the table below. What is the firms cost of capital?
| Type of Capital | Capital Structure | Cost of Capital | WACC | |
| $000s | % of total capital | |||
| Debt | 15000 | 0.06 | ||
| Retained Earnings | 47000 | 0.12 | ||
| New Common Stock | 22000 | |||
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