Olsen Outfitters Inc. believes that its optimal capital structure consists of 60% of equity and 40% of debt, and its tax rate is

Question

Olsen Outfitters Inc. believes that its optimal capital structure consists of 60% of equity and 40% of debt, and its tax rate is 30%. Olsen must raise additional capital to fund it upcoming expansion. The firm will have $5 million of retained earnings with a cost of r, 12%. New common stock in an amount up to 10 million would have a cost
of re-14.5%. Furthermore, Olsen can raise up to $6 million of debt at an interest rate
of rd=8% and an additional $7 million of debt at rd=11%. The CFO estimates that a
proposed expansion would require an investment of $11 million. What is the WACC
for the last dollar raised to complete the expansion?
9.44%
10.40%
11.90%
10.94%

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