On the first of January Dexters Co. total Assets where 270 million. The following structure of capital is optimal.

Long Term Debt 135,000,000

Equity 135,000,000

Total Passives and Equity 270,000,000

The new bonds will have a cupon rate of 10% and will be sold on par. The common stocks, which sell for $60 per share, can be sold such that the company obtains a total of $54 per share. Its estimated that the required return rate by stockholders is 12% and it will consist of 4% dividend yield and a growth rate of 8%. (The next dividend is expected to be $2.40, so $2.40/$60 = 4%) It is estimated that the retained earnings from las period will be 13.5 million. The fiscal tax rate is 40%. Assuming that all asset expansion (Gross expenses for fixed assets plus related working capital) is included in the capital budget, the dollar amount of the capitula budget, ignoring depreciation, will be 135 million.

To maintain the current capital structure, what part of the budget should Dexter finance through stockholders' equity?

What part of the new equity funds needed will be generated internally? And what part of them will be generated externally?

Calculate the cost of each of the components of stockholders' equity

At what level of capital expenditures will a breakpoint in the marginal capital cost program of dexter ensue.

Calculate the WACC below and above the break point in the marginal capital cost program.

Graph the marginal cost of capital program. Also, draw an investment opportunity program that is consistent with the marginal capital cost program and the protected capital budget.