. o . . HW 1 (04) Relevant Company Information for problem posted on the board in the last class. Capital Structure: Debt = 60%, Equity = 40% After tax cost of existing (old) debt = 7%, New Debt= 8% Expected Net Income = $1 million Payout Ratio= 50% Funds from operations other than income = $200,000 Expected dividend = $2/shr Growth Rate= 5% Flotation Cost=15% Tax rate = -35% Questions to be answered: a. What is the breakpoint of retained earnings? 2pts b. Prepare a Marginal Cost of Capital Schedule 8pts . . . o . . HW 1 (04) Relevant Company Information for problem posted on the board in the last class. Capital Structure: Debt = 60%, Equity = 40% After tax cost of existing (old) debt = 7%, New Debt= 8% Expected Net Income = $1 million Payout Ratio= 50% Funds from operations other than income = $200,000 Expected dividend = $2/shr Growth Rate= 5% Flotation Cost=15% Tax rate = -35% Questions to be answered: a. What is the breakpoint of retained earnings? 2pts b. Prepare a Marginal Cost of Capital Schedule 8pts