A firm plans to raise 4 million by borrowing at an interest, Microeconomics

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A firm plans to raise 4 million by borrowing at an interest

A firm plans to raise $4 million by borrowing at an interest rate of 16 percent and to raise $1 million by issuing common stock. The firm's stock has a beta coefficient of 2, the risk free interest rate is 6 percent, the average rate of return on stock is 9% and the marginal tax rate is 25 percent.

What is the firm's composite cost of capital?

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Microeconomics: A firm plans to raise 4 million by borrowing at an interest

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Microeconomics: A firm plans to raise 4 million by borrowing at an interest

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