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1 . Ford Motor Company desires to finance all projects with funds raised according to their target capital structure of 6 0 % debt, 1

1. Ford Motor Company desires to finance all projects with funds raised according to their target capital structure of 60% debt, 10%preferred stock, and 30% common stock. Ford can issue debt at an after-tax cost of 6.2% indefinitely, the cost of preferred stock is 9.2%, Ford has $4,200,000 of retained earnings at a cost of 10.6%, and can issue new common stock at a cost of 12.4%. a. What is the breakpoint for Ford Motor's where their cheapest source of funds is exhausted? b. What is Ford Motor's first weighted average cost of capital (where the cheapest sources of funds are used)? What is Ford Motor's second weighted average cost of capital (after the cheapest sources of funds are exhausted)?
Ford Motor Company desires to finance all projects with funds raised according to their target capital structure of 60% debt, 10% preferred stock, and 30% common stock. Ford can issue debt at an after-tax cost of 6.2% indefinitely, the cost of preferred stock is 9.2%, Ford has $4,200,000 of retained earnings at a cost of 10.6%, and can issue new common stock at a cost of 12.4%.
a. What is the breakpoint for Ford Motor's where their cheapest source of funds is exhausted? (5 points)
b. What is Ford Motor's first weighted average cost of capital (where the cheapest sources of funds are used)?(5 points)
c. What is Ford Motor's second weighted average cost of capital (after the cheapest sources of funds are exhausted)?

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