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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) Weighted average cost

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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) Weighted average cost of capital (Ka) 85% 7.2 7.5 20% 10 70 1.70% 0.72 5.25 7 61% a. If the firm has $42 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 8.5 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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