Delta Corporation has the following capital structure:

	Cost (aftertax)			Weights			Weighted Cost
Debt (Kd)		8.1	%		35	%		2.84	%
Preferred stock (Kp)		9.6			5			.48
Common equity (Ke) (retained earnings)		10.1			60			6.06
Weighted average cost of capital (Ka)								9.38	%

a.	If the firm has $18 million in retained earnings, at what size capital structure will the firm run out of retained earnings? (Enter your answer in millions of dollars (e.g., $10 million should be entered as "10").)

Capital structure size (X)

$ million

b.

The 8.1 percent cost of debt referred to earlier applies only to the first $14 million of debt. After that, the cost of debt will go up. At what size capital structure will there be a change in the cost of debt? (Enter your answer in millions of dollars (e.g., $10 million should be entered as "10").)

Capital structure size (Z)

$ million

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