Making Star$$ Products' Financing$/$Investment Decision$$Star Products Company is a growing manufacturer of automobile accessories whose stock is actively traded on the$$ over$-$the$-$counter $($OTC$)$ market. During$2012,$ the$$ Dallas$-$based company experienced sharp increases in both sales and earnings. Because of this recent$$ growth, Melissa$$ Jen, the$$ company's treasurer, wants to make sure that available funds are being used to their fullest. Management policy is to maintain the current capital structure proportions of $30\%$long$-$term debt, $10\%$ preferred$$ stock, and $60\%$ common stock equity for at least the next $3$ years. The firm is in the $40\%$ tax bracket. $$Star$\text{'}$s division and product managers have presented several competing investment opportunities to Jen.$$ However, because funds are$$ limited$,$ choices of which projects to accept must be made.$$ Star's current investment opportunities are shown in the table below.Investment Opportunities for Star Products Company$$Investment opportunity $$ Internal rate of return$($IRR$)$ Initial investment$$A$.15\%$ $$400,000$B$.22\%$$$200,000$C$.25\%$$$700,000$ D$.23\%$$$400,000$ E$.17\%$$$500,000$F$.19\%$$$600,000$G$.14\%$$$500,000$To estimate the$$ firm's weighted average cost of capital$($WACC$),$ Jen contacted a leading investment banking$$ firm, which provided the financing cost data shown in the following table.$$Financing Cost Data Star Products CompanyLong$-$term debt: The firm can raise $$450,000$ of additional debt by selling $15-$year, $$1,000-$par$-$value, $9\mathrm{.}0\%$ coupon interest rate bonds that pay annual interest. It expects to net $$960$ per bond after flotation costs. Any debt in excess of $$450,000$ will have a$$ before$-$tax cost, rd$,$ of $13\mathrm{.}0\%.$Preferred$$ stock: Preferred$$ stock, regardless of the amount$$ sold, can be issued with a $$70$ par value and a $14\mathrm{.}0\%$ annual dividend rate and will net $$65$ per share after flotation costs.Common stock$$ equity: The firm expects dividends and earnings per share to be $$0\mathrm{.}96$ and $$3\mathrm{.}20,$respectively$,$ in $2013$ and to continue to grow at a constant rate of $11\mathrm{.}0\%$ per year. The$$ firm's stock currently sells for $$12\mathrm{.}00$ per share. Star expects to have $$1,500,000$ of retained earnings available in the coming year. Once the retained earnings have been$$ exhausted, the firm can raise additional funds by selling new common$$ stock, netting $$9\mathrm{.}00$ per share after underpricing and flotation costs.$$To Do a$.$ Calculate the cost of each source of$$ financing, as$$ specified: $(1)$ Long$-$term$$ debt, first $$450,000.(2)$ Long$-$term$$ debt, greater than $$450,000.(3)$ Preferred$$ stock, all amounts. $(4)$ Common stock$$ equity, first $$1,500,000.(5)$ Common stock$$ equity, greater than $$1,500,000.$b$.$ Calculate$$ Star's weighted average cost of capital$($WACC$)$ for each of the following$$ situations:$(1)$ Long$-$term debt less than $$450,001$ and common stock equity less than $$1,500,001.(2)$ Long$-$term debt greater than $$450,000$ and common stock equity less than $$1,500,001.(3)$ Long$-$term debt greater than $$450,000$ and common stock equity greater than $$1,500,000.$c$.$ Answer the following questions while considering$$ Star's current capital structure and your answers to part $($b$).$ Be sure to explain your answers. $(1)$ How much$$ long$-$term debt can Star use before affecting its cost of common$$ stock?$(2)$ What is the maximum amount of financing that Star can raise without using the more expensive new common$$ stock?$(3)$ In part $($b$),$ why were you not asked to calculate$$ Star's WACC when$$ long$-$term debt is less than $$450,001$ and common stock equity is greater than $$1,500,000?$d$.$ Regardless of$$ Star's WACC, rank the projects according to most attractive to least attractive and explain your ranking procedure. e$.$ Based on the current capital structure and each of the financing scenarios$$ below, determine which investment opportunities Star should undertake. Explain your answers.$(1)$ Long$-$term debt of $$450,000.(2)$ Common stock equity of $$750,000.(3)$ Common stock equity of $$1,500,000.(4)$ Long$-$term debt of $$1,000,000.$