Case 2. Cost of Capital (30%)

The capital structure of Investing. Corp is as follows:

Debt Preferred Stock Common Stock

Price $ 750 $ 850 $ 250

Unit 1.500 1100 4850

Maturity 8 years - -

Coupon Rate 5.50% - -

Face Value $ 1000 - -

Flotation 4% 3.5% 2.5%

Dividend - $ 20 $ 25

Growth Rate - - 2.5%

Tax Rate 25% - -

Here are the following conditions of Investing. Corp if they want to collect new funds in the capital market:

Source Range After-Tax Cost

Debt Up to 200,000 8.88%

200,001 to 500,000 11.45%

More than 500,000 12.00%

Preferred Stock Up to 100,000 10.85%

More than 100,000 12.85%

Common Stock Up to 500,000 12.55%

500,001 to 1,000,000 14.86%

More than 1,000,000 16.57%

a. Calculate Market Value, Percentage of Total and After-Tax Cost (10%)

b.Calculate Break-points, Total Capital, Cost of Common Stock, Preferred Stock, and Debt. (15%).

c.Make WACC Marginal's Chart of Investing. Corp using weights of Total Capital (5%)