FIN 310: Extra Credit Capital Budgeting Assignment Directions: Complete the following problems and upload your solutions in D2L You must support your answers and show all calculations in order to receive credit. You may earn up to 5 extra credit points. Problem 1 (3 points) Company ABC has an optimal capital structure of 40% debt and 60% common equity. Assume that the debt break points occur at $36 million and $50 million, and that the common equity break point occurs at $45 million. The after tax cost of debt is 6%, 10%, and 14% as borrowing increases, and the cost of common equity is 15% if using retained earnings and 20% if using newly issued common stock. Prepare the marginal cost of capital schedule. Problem 2 (2 points) Use the following information to determine the optimal capital budget for Company Z. Investment Opportunity Schedule Marginal Cost of Capital (MCC) Schedule Project NINV IRR Dollars Invested A 9 16.8% 0-20 13.8% B 12 15.0% over 20 - 34 15.2% 24 15.5% over 34-45 15.7% D 15 18.0% over 45 16.0%