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Posted: November 2nd, 2022

Northwood University, Texas Campus-FINANCE 3010-Donner, Inc. will finance a proposed investment

Donner, Inc. will finance a proposed investment by issuing new securities while maintaining its optimal capital structure of 60% debt and 40% equity. The firm can issue bonds at a price of $950.00 before $15 flotation costs. The 10-year bonds will have an annual coupon rate of 8% and a face value of $1,000. The company can issue new equity at a before-tax cost of 16% and its marginal tax rate is 34%. What is the appropriate cost of capital to use in analyzing this project?3.63%8.77%9.97%11.81%

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