d. Calculate the component costs of capital (i.e., debt, preferred equity, retained earnings, and new common equity). Use the YIELD function (see page 292) when finding the after-tax cost of debt. Use the CAPM to find the cost of retained earnings, and the constant growth model for new common equity. Calculate the weighted average costs of capital using both the market- value and book-value weights with retained earnings and also new common equity. e. 3. Suppose that TRM Consulting Services has discussed its need for capital with its investment bankers. The bankers have estimated that TRM can raise new funds in the capital markets under the following conditions: After-Tax Cost Source Retained Earnings Common Equity 10.50% 10.93% 11.26% 11.85% Range Up to 150,000 Up to 1,000,000 1,000,001 to 3,000,000 More than 3,000,000 Up to 200,000 More than 200,000 Up to 1,000,000 1,000,001 to 2,000,000 More than 2,000,000 Preferred Equity 4.86% 6.25% Debt 4.33% 4.86% 5.12% a. Using the information from the previous problem, calculate each of the break-points, including the break-point due to retained earnings. Create a chart of TRM's marginal WACC curve using the market- value weights. Make sure that it is a perfect step function. b. d. Calculate the component costs of capital (i.e., debt, preferred equity, retained earnings, and new common equity). Use the YIELD function (see page 292) when finding the after-tax cost of debt. Use the CAPM to find the cost of retained earnings, and the constant growth model for new common equity. Calculate the weighted average costs of capital using both the market- value and book-value weights with retained earnings and also new common equity. e. 3. Suppose that TRM Consulting Services has discussed its need for capital with its investment bankers. The bankers have estimated that TRM can raise new funds in the capital markets under the following conditions: After-Tax Cost Source Retained Earnings Common Equity 10.50% 10.93% 11.26% 11.85% Range Up to 150,000 Up to 1,000,000 1,000,001 to 3,000,000 More than 3,000,000 Up to 200,000 More than 200,000 Up to 1,000,000 1,000,001 to 2,000,000 More than 2,000,000 Preferred Equity 4.86% 6.25% Debt 4.33% 4.86% 5.12% a. Using the information from the previous problem, calculate each of the break-points, including the break-point due to retained earnings. Create a chart of TRM's marginal WACC curve using the market- value weights. Make sure that it is a perfect step function. b