Determine the Weighted Cost of Capital for the Mills Company

question 44

Multiple Choice

Determine the weighted cost of capital for the Mills Company that will finance its optimal capital budget with $120 million of long-term debt (k_d = 12.5%) and $180 million in retained earnings (k_e = 16.0%) . Mills' present capital structure is considered optimal. The company's marginal tax rate is 40%. (Compute answer to nearest 0.1%.)

• A) 14.3%
• B) 12.6%
• C) 14.6%
• D) 11.9%

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