Owens Enterprises is in the process of determining its capital budget for the next fiscal year. The firms current capital structure, which it considers to be optimal, is contained in the following balance sheet:

Through discussions with the firms investment bankers, lead bank, and financial officers, the following information has been obtained:

a. The firm expects net income from this year to total $80 million. b. The firm intends to maintain its dividend policy of paying 42.25 percent of earnings to stockholders. c. The firm can borrow $18 million from its bank at a 11 percent annual rate.

d. Any additional debt can be obtained through the issuance of debentures (at par) that carry a 14 percent coupon rate. e. The firm currently pays $4.25 per share in dividends (D0). Dividends have grown at a 5 percent rate in the past. This growth is expected to continue. f. The firms common stock currently trades at $44 per share. If the firm were to raise any external equity, the newly issued shares would net the company $40 per share. g. The firm is in the 35 percent marginal tax bracket.

h. Compute Owens marginal cost of capital schedule to fund capital projects totaling:

Part 1 $60 million - What is the margin cost of capital for this level?

Part 2 $66 million (i.e., $6 million more) - What is the margin cost

Part 3 Above $66 million. - What is the margin cost of capital for this level? of capital for this level?