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Business, 21.05.2020 00:08 xeskimopie

The chief financial officer of Portland Oil has given you the assignment of determining the firm's marginal cost of capital. The present capital structure which is considered optimal, is: Book Value Market Value Debt $ 80 million $ 60 million Preferred Stock 30 million 30 million Common Equity 100 million 210 million Total $210 million $300 million The anticipated financing opportunities are these: Debt can be issued with a 12 percent before-tax cost. Preferred stock will be $100 par, carry a dividend of 15 percent, and can be sold to net the firm $85 per share. Common equity has a beta of 1.20, the return on the market is 8 percent, and the risk-free rate is 2 percent. The firm's tax rate is 40 percent. The company’s marginal cost of capital (MCC) is:

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The chief financial officer of Portland Oil has given you the assignment of determining the firm's m...
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