Problem $11-27($Algo$)$ Marginal cost of capital $[$LO$11-5]$

$2\mathrm{.}22$

points

Delta Corporation has the following capital structure:

$\backslash$table$[[,$Cost,,Weighted$],[$Debt $(K_d),($aftertax$),$Weights,Cost$],[$Preferred stock $(K_p),8\mathrm{.}5\%,20\%,1\mathrm{.}70\%$

If the firms has $$42$ mil in retqined earnings, at what size cqpital structure will the firm run out of retained earnings?

B$)$ earlier applies only to the first $$14$ milion of debt. After thqt the cost of debt will go up$.$ At what size capital structure will there be a change in the cost of debt?