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

Question

Quizplus · Accepted Answer

kₐ = 0.40 × 12.5%(1 - 0.4) + 0.60 × 16.0% = 12.6%

Determine the Weighted Cost of Capital for the Mills Company