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Mathematics, 03.05.2021 15:20 karmaxnagisa20

WorldFamous Hotel's current capital structure is 60% equity, 35% debt, and 5% preferred stock. This is considered optimal. WorldFamous Hotel's is considering a $30 million capital budgeting project. During the coming year WorldFamous expects to have $15 million of retained earnings available to finance this capital budgeting project. The marginal tax rate is 30 percent. Calculate WorldFamous's weighted average cost of capital that is appropriate to use in evaluating this capital budgeting project. WorldFamous can raise long-term debt at pretax interest rate of 9 percent. Preferred stock can be sold at a $35 price with a $7 annual dividend. Flotation or issuance costs will be $7 per preferred share.

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WorldFamous Hotel's current capital structure is 60% equity, 35% debt, and 5% preferred stock. This...
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