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Delta Corporation has the following capital structure: Weighted Cost (aftertax) Weights Cost Debt (Kd) Preferred stock (Kp) Common equity (Ke) (retained earnings) 5.6% 25% 1.40%

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Delta Corporation has the following capital structure: Weighted Cost (aftertax) Weights Cost Debt (Kd) Preferred stock (Kp) Common equity (Ke) (retained earnings) 5.6% 25% 1.40% 10.2 25 2.55 13.2 6.60 50 Weighted average cost of capital (Ka) 10.55% a. If the firm has $31 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 5.6 percent cost of debt referred to earlier applies only to the first $22 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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