Caldwell Products Limited (CPL) has compiled the following data for its Optimal Capital

Structure and three sources of capital for their various ranges of new financing are as follows

Source of Capital	Weight
Long term Debt	40%
Preferred Equity	20%
Common Equity	40%

Source of Capital	Range of New Financing	Weight
Long Term Debt	$1 to $320,000	6%
	$320,001 and above	8%
Preferred Equity	$1 and above	17%
Common Equity	$1 to $200,000	20%
	200,001 and above	24%

CPL has also identified several investment opportunities for consideration.

These are listed below with respected to their expected internal rate of return (IRR)

Investment opportunity	Expected IRR	Initial Investment
A	19%	200,000
B	15%	300,000
C	22%	100,000
D	14%	600,000
E	23%	200,000
F	13%	100,000
G	21%	300,000
H	17%	100,000
J	16%	400,000

Required:

A) Determine the break-points and range of new financing associated with each source of

capital?

B) Calculate the weighted average cost of capital for each of new financing found in (a)

Hint: There are three ranges

C) Using the result in b) and available investment opportunities shown above, draw CPL's

Marginal Cost of Capital (MCC) schedule and Investment Opportunity Schedule (IOS)

D) Which, if any, of the available investment do you recommend that CPL select? Why?

E) Calculate the overall cost of capital for CPL. Which projects CPL should select? Is it

different from the previous question (d)? If so, explain why.