Purple Papers Co. is expanding to include pink paper products and its managers need to determine if it should use financ

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Purple Papers Co Is Expanding To Include Pink Paper Products And Its Managers Need To Determine If It Should Use Financ 1 (41.3 KiB) Viewed 13 times

Purple Papers Co. is expanding to include pink paper products and its managers need to determine if it should use finance this project internally or if it should issue additional shares of stock. Its target capital structure includes 40% debt, 15% preferred stock and 45% common stock. The company's cost of debt is 6%, cost of preferred stock is 8%, cost of retained earnings is 10% and the cost of issuing new shares of stock is 12%. Pink Papers has a marginal tax rate of 40%. What is the difference in the WACC between using internally generated funds and issuing additional shares of stock for this expansion? 2.00% 7.14% 0.90% O 8.04%