Chen Chocolate Companys EPS in 2020 was $1.80, and in 2015 it was $1.25. The companys payout ratio is 60%, and the stock is currently valued at $37.75. Flotation costs for new equity will be 12%. Net income in 2021 is expected to be $20 million.

The companys investment banker estimates that it could sell 15-year semiannual bonds with a coupon rate of 6.5%. The face value would be $1,000 and the flotation costs for a bond issue would be 1%. The market-value weights of the firms debt and equity are 30% and 70%, respectively. The firm faces a 25% tax rate.

a. Based on the five-year track record, what is Chens EPS growth rate? What will the dividend be in 2021?

b. Calculate the firms cost of retained earnings and the cost of new common equity.

c. Calculate the break-point associated with retained earnings.

d. What is the firms after-tax cost of new debt?

e. What is the firms WACC with retained earnings? With new common equity?

f. Create a scatter chart that shows the firms marginal WACC as a step function. The x-axis should go to at least $20 million. Be sure to fully label the chart, including a data label with leader lines that shows the value of the break-point.