24)

Delta Corporation has the following capital structure:

	Cost (aftertax)	Weights	Weighted Cost
Debt (Kd)		7.5	%		15	%		1.13	%
Preferred stock (Kp)		6.2			10			0.62
Common equity (Ke) (retained earnings)		8.5			75			6.38
Weighted average cost of capital (Ka)								8.12	%

a.	If the firm has $48 million in retained earnings, at what size capital structure will the firm run out of retained earnings?(Enter your answer in millions of dollars (e.g., $10 million should be entered as "10").)

Capital structure size (X)

$million

b.

The 7.5 percent cost of debt referred to earlier applies only to the first $15 million of debt. After that, the cost of debt will go up. At what size capital structure will there be a change in the cost of debt?(Enter your answer in millions of dollars (e.g., $10 million should be entered as "10").)

Capital structure size (Z)

$million