Suppose that TRM Consulting Services has discussed its need for capital with its investment bankers. The bankers have estimated that TRM can raise new funds in the capital markets under the following conditions:

a. Using the information developed in the previous problem, calculate each of the break-points. Donít forget to include the break-point due to retained earnings.

b. Create a chart of TRMís marginal weighted average cost of capital curve using the market value weights. Make sure that it is a perfect step function. L01