Roberson Fashions capital structure consists of 30 percent debt and 70 percent common equity. Roberson is considering

Question:

Roberson Fashion’s consists of 30 percent debt and 70 percent common equity. Roberson is considering raising new capital to finance its expansion plans. The company’s investment banker has compiled the following information about the if the firm issues debt:
Amount of Debt After-Tax 1 – $150,000 ........ 6.5%
150,001 – 450,000 ........ 7.8
450,001 – 840,000 ........ 9.0
Above– 840,000 ........ 11.0
Roberson expects to generate $350,000 in retained earnings next year. For any new equity that is issued, Roberson will incur flotation costs of 6 percent. What are the break points that Roberson faces when computing its marginal cost of capital?

Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a... Cost Of Debt
The cost of debt is the effective interest rate a company pays on its debts. It’s the cost of debt, such as bonds and loans, among others. The cost of debt often refers to before-tax cost of debt, which is the company's cost of debt before taking...