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The Beta Corporation asks you to determine its marginal cost of capital Betas current capital structure consists of 45 percent debt 15 percent preferred stock and 40 percent common equity The

The Beta Corporation asks you to determine its marginal cost of capital. Beta’s current capital structure consists of 45 percent debt, 15 percent preferred stock and 40 percent common equity. The separate marginal costs of the various components of the capital structure are as follows: debt, after-tax 5.0 percent; preferred stock, 9 percent; retained earnings, 12 percent; and new common stock, 13.5 percent. If Beta has P15 million investible retained earnings, and Beta has an opportunity to invest in an attractive project that costs P60 million, what is the marginal cost of capital of Beta Corporation?
A. 8.40 percent        C. P9.00 percent
B. 8.63 percent        D. P9.88 percent

Jun 20 2021 View more View Less

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