The XYZ Company is planning a $50 million expansion.

 The XYZ Company is planning a $50 million expansion. The expansion is to be financed by selling $20 million in new debt and $30 million in new common stock. The before-tax required rate of return on debt is 9%, and the required rate of return on equity is 14%. If the company is in the 40% tax bracket, what is the marginal cost of capital?
A.
9.0%
B.
10.6%
C.
14.0%
D.
11.5%

Solution