A. Olsen Outfitters Inc. believes that its optimal capital structure consists of 65% common equity and 35% debt, and its

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A. Olsen Outfitters Inc. believes that its optimal capital
structure consists of 65% common equity and 35% debt, and its tax
rate is 25%. Olsen must raise additional capital to fund its
upcoming expansion. The firm will have $2 million of retained
earnings with a cost of rs = 12%. New common stock
in an amount up to $8 million would have a cost of
re = 14.5%. Furthermore, Olsen can raise up to $4
million of debt at an interest rate of rd = 10% and
an additional $6 million of debt at rd = 11%. The
CFO estimates that a proposed expansion would require an investment
of $7.0 million. What is the WACC for the last dollar raised to
complete the expansion? Round your answer to two decimal
places.
%
B. Olsen Outfitters Inc structure consists solely of debt
and common equity. It can issue debt at rd = 11%,
and its common stock currently pays a $2.75 dividend per share
(D0 = $2.75). The stock's price is currently
$22.00, its dividend is expected to grow at a constant rate of 4%
per year, its tax rate is 25%, and its WACC is 14.70%. What
percentage of the company's capital structure consists of debt? Do
not round intermediate calculations. Round your answer to two
decimal places.
%