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J & B Corp. is investing in a major capital budgeting project

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Question;J & B Corp. is investing in a major capital budgeting project that will require the expenditure of $20 million. The money will be raised by issuing $5 million of bonds, $3 million of preferred stock, and $12 million of new common stock. The company estimates is after-tax cost of debt to be 5%, its cost of preferred stock to be 9%, the cost of retained earning to be 13%, and the cost of new common stock to be 16%. What is the weighted average cost of capital for this project?

 

Paper#50426 | Written in 18-Jul-2015

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