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Bally Technology, Inc desires to finance all projects with funds acquired according to their target capital structure of 25% debt, 10% preferred stock, and
Bally Technology, Inc desires to finance all projects with funds acquired according to their target capital structure of 25% debt, 10% preferred stock, and 65% equity. Bally can issue debt at a before tax cost of 8.6% indefinitely, issue preferred stock at a cost of 10.21%, has S of retained earnings at a cost of 13.4%, and can issue new common stock at a cost of 15.700. Bally's marginal tax rate is 28%. A. B. c. What is Bally's first weighted average cost of capital (where the cheapest sources of funds are used)? What is the breakpoint for Bally's where their cheapest source of funds is exhausted? What is Bally's second weighted average cost of capital (after the cheapest sources of funds are exhausted)?
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