15. A company has determined that its optimal capital structure consists of 40 percent debt and 60 percent equity. Assume the firm is considering an investment worth $22,500 and other internally generated income other than net income of $25,000. The expected cashflows of the project is $3,500 with growth pecked at the expected inflation rate of 0%. - kd for existing debt =8% and new debt issues is 9.5%. - Current Net income =$40,000. - Payout ratio =50%. - Tax rate =40%. - P0=$25 - Growth (g)=0%. - Shares outstanding =10,000. - Flotation cost on additional equity =15% A. What is the appropriate cost of equity for this firm's investment plans? (1pt) Show all work and explain your answer in full. (hint; breakpoint of RE)(2pts) B. Set up a marginal cost of capital schedule for the firm.(3pts) 15. A company has determined that its optimal capital structure consists of 40 percent debt and 60 percent equity. Assume the firm is considering an investment worth $22,500 and other internally generated income other than net income of $25,000. The expected cashflows of the project is $3,500 with growth pecked at the expected inflation rate of 0%. - kd for existing debt =8% and new debt issues is 9.5%. - Current Net income =$40,000. - Payout ratio =50%. - Tax rate =40%. - P0=$25 - Growth (g)=0%. - Shares outstanding =10,000. - Flotation cost on additional equity =15% A. What is the appropriate cost of equity for this firm's investment plans? (1pt) Show all work and explain your answer in full. (hint; breakpoint of RE)(2pts) B. Set up a marginal cost of capital schedule for the firm.(3pts)