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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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