Chen Chocolate Company's EPS in 2020 was $1.80, and in 2015 it was $1.25. The company's payout ratio is 60%, and the stock is currently valued at $37.75. Flota- tion costs for new equity will be 12%. Net income in 2021 is expected to be $20 million The company's 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 flota- tion costs for a bond issue would be 1%. The market value weights of the firm's 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 Chen's EPS growth rate? What will the dividend be in 2021? b. Calculate the firm's cost of retained earnings and the cost of new common equity. c. Calculate the break-point associated with retained earnings. What is the firm's after-tax cost of new debt? What is the firm's WACC with retained earnings? With new common equity? . f. Create a scatter chart that shows the firm's marginal WACC as a step func- tion. 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 d. EPS2015 EPS2020 4 A B Chen Chocolate Company 2 $ 1.25 3 $ 1.80 Payout Ratio 60% 5 Stock Price $ 37.75 6 Flotation Costs (Equity) 12% 7 Net Income2021 $ 20,000,000 8 9 Bond Face Value $ 1,000 10 Bond Coupon Rate 6.5% 11 Bond Term to Maturity 15 12 Bond Payment Frequency 13 Flotation Costs (Bonds) 1% 14 Tax Rate 25% 15 16 Capital Structure 17 Debt 30% 18 Equity 70% 19 Pre-tax Cost of Debt 20 After-tax Cost of Debt 21 22 EPS Growth Rate 23 Dividend2021 24 Cost of RE 25 Cost of New Equity 26 Retained Earnings2021 27 28 29 WACC 30 With Retained Earnings 31 With New Equity Chen Chocolate Company's EPS in 2020 was $1.80, and in 2015 it was $1.25. The company's payout ratio is 60%, and the stock is currently valued at $37.75. Flota- tion costs for new equity will be 12%. Net income in 2021 is expected to be $20 million The company's 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 flota- tion costs for a bond issue would be 1%. The market value weights of the firm's 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 Chen's EPS growth rate? What will the dividend be in 2021? b. Calculate the firm's cost of retained earnings and the cost of new common equity. c. Calculate the break-point associated with retained earnings. What is the firm's after-tax cost of new debt? What is the firm's WACC with retained earnings? With new common equity? . f. Create a scatter chart that shows the firm's marginal WACC as a step func- tion. 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 d. EPS2015 EPS2020 4 A B Chen Chocolate Company 2 $ 1.25 3 $ 1.80 Payout Ratio 60% 5 Stock Price $ 37.75 6 Flotation Costs (Equity) 12% 7 Net Income2021 $ 20,000,000 8 9 Bond Face Value $ 1,000 10 Bond Coupon Rate 6.5% 11 Bond Term to Maturity 15 12 Bond Payment Frequency 13 Flotation Costs (Bonds) 1% 14 Tax Rate 25% 15 16 Capital Structure 17 Debt 30% 18 Equity 70% 19 Pre-tax Cost of Debt 20 After-tax Cost of Debt 21 22 EPS Growth Rate 23 Dividend2021 24 Cost of RE 25 Cost of New Equity 26 Retained Earnings2021 27 28 29 WACC 30 With Retained Earnings 31 With New Equity