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(Answered) Cost of Capital before and after the Break Even in the MCC


Wellington Gas has a target capital structure of 50% equity, 40% debt, and 10% preferred stock. The cost of retained earnings is 16 percent, and the cost of new equity (from selling stock) is 16.7 percent. Wellington can sell debentures at an after-tax cost of 8.3%. Its cost of preferred stock is 11.9%. What is Wellington's cost of capital before and after the break point in the MCC?;a. 12.51% and 12.86%;b. 11.18% and 11.53%;c. 14.23% and 14.68%;d. none of the above
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Cost of Capital before and after the Break Even in the MCC

 


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