Question: Branston Soda Company manufactures soda. In 20x0, Branston earned $12.0 million in operating income and had total capital of $74 million. Branston's total capital is 65 percent equity and 35 percent 10-year bonds paying 4 percent interest. Branston's marginal tax rate is 25 percent. The company's CFO believes 16 percent is an appropriate required equity rate of return.