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Business, 24.12.2019 23:31 mollietennis

Turnbull co. has a target capital structure of 58% debt, 6% preferred stock, and 36% common equality. it has a before-tax cost of debt of 11.1%, and its cost of preferred stock is 12.2%. if turnbull can raise all of its equity capital from retained earnings, its cost of common euity will be 14.7%. however, if it is necessary to raise new common equity, it will carry a cost of 16.8%. if its current tax rate is 40%, how much higher will turnbull’s weighed average cost of capital (wacc) be if it has to raise additional common equity capital by issuing new common stock instead of raising the funds through retained earnings?

a) 0.75%

b) 0.90%

c) 0.68%

d) 0.98%

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Turnbull co. has a target capital structure of 58% debt, 6% preferred stock, and 36% common equality...
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