Problem:
The Black Bird Company plans a $45 million expansion. The expansion is to be financed by selling $35 million in new debt and $10 million in new common stock. The before tax required rate of return on debt is 7% and the required rate of return on equity is 20%.
Required:
Question: If the company is in the 34% tax bracket, what is the weighted average cost of capital?
Note: Explain all steps comprehensively.