Chapter 11 HW Her See Check my wers 2 Problem 11-29 Marginal cost of capital (LO11-5) 30 The McGee Corporation finds it is necessary to determine its marginal cost of capital McGee's current capital structure calls for 50 percent Gebt. 20 percent preferred stock and 30 percent common equity Intly common equity will be in the form of retained camnings e) and then new common stock Kol. The costs of the various sources of financing are as follows dobit fiert. 60 percent preferred stock, 80 percent retained earnings. 90 percent and new common shock, 10.2 percent a What is the initial weighted average cost of capital (include debit preferred stock, and common equity in the form of retained earnings Ke)(Do not found intermediate calculations. Input your answers as a percent rounded to 2 decimal places . Weighted Cost Dath Preferred Comment Weighted average cost of capite 2005 b. If the firm has $210 million in retained earnings, at whatsire capital structure will the fem run out of retained coming Enter your answer in millions of dollars (eg. $10 million should be entered as "10") Inition Capital de X) Check my w 2 What will the marginal cost of capitale immediately after that point? Equity will remain at 30 percent of the capital structure, but will be in the form of new common stock. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) 10 Margina con cap lon d. The 60 percent cost of debt referred to above aplies only to the first $50 million of debt. Mer that, the cost of debt will be 112 percent. At what stre capital structure will there be a change in the cost of debt? Enter your answer in millions of dollars - $10 million should be entered as "10")) Coa What will the marginal cost of capital be immediately her that point? Consider the facts in both parts and do not found Intermediate calculations. Input your answer as 8 percent rounded to 2 decimal places)