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Marginal Incorporated (MI) has determined that its after-taxcost of debt is 10.0%. Its cost of preferred stock is 14.0%. Itscost of internal equity is 16.0%, and its cost of external equityis 21.0%. Currently, the firm's capital structure has $372 millionof debt, $30 million of preferred stock, and $198 million of commonequity. The firm's marginal tax rate is 25%. The firm is currentlymaking projections for the next period. Its managers havedetermined that the firm should have $70 million available fromretained earnings for investment purposes next period. What is thefirm's marginal cost of capital at a total investment level of $255million?
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