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please help! The Nolan Corporation finds it is necessary to determine its marginal cost of capital. Nolan's current capital structure calls for 3 5 percent
please help!
The Nolan Corporation finds it is necessary to determine its marginal cost of capital. Nolan's current capital structure calls for
percent debt, percent preferred stock, and percent common equity. Initially, common equity will be in the form of
retained earnings and then new common stock The costs of the various sources of financing are as follows: debt
aftertax percent; preferred stock, percent; retained earnings, percent; and new common stock, percent.
a What is the initial weighted average cost of capital? Include debt, preferred stock, and common equity in the form of
retained earnings,
Note: Do not round intermediate calculations. Input your answers as a percent rounded to decimal places.
b If the firm has $ million in retained earnings, at what size capital structure will the firm run out of retained earnings?
Note: Enter your answer in millions of dollars eg $ million should be entered as
Capital structure size c What will the marginal cost of capital be immediately after that point? Equity will remain at percent of the capital
structure, but will all be in the form of new common stock,
Note: Do not round intermediate calculations. Input your answer as a percent rounded to decimal places.
d The percent cost of debt referred to earlier applies only to the first $ million of debt. After that, the cost of debt will be
percent. At what size capital structure will there be a change in the cost of debt?
Note: Enter your answer in millions of dollars eg $ million should be entered as
Capital structure size Z
million
e What will the marginal cost of capital be immediately after that point? Consider the facts in both parts and
Note: Do not round intermediate calculations. Input your answer as a percent rounded to decimal places.
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