Q3aGCC Power Corp has the following capital structure at present for a Thermal

Electricity Plant.

Sources

Current Liabilities

11% Term loan

9% Cumulative Preferred Stock

Common Stock ($1 par value)

Retained Earnings

Stockholders Equity and Liabilities

Amount

(S million)

700

2000

700

900

3000

7300

The Thermal Project needs additional funds of $ 900 million to finance the capacity expansion for power plant. It is evaluating the option of raising this capital using the following sources.

Issue common stock at a price of $190 to the project sponsoring enterprise

Issue preferred stock of $100 at par with a dividend rate of 9%.

Issue 10-year bonds of $10,000 each with an interest rate of 7%, The bonds provide a yield of 9.5% to the investors.

Issue 10-year Zero Coupon Bonds of $10,000 face value at a price of 55%.

Required:

Show the statement of Sources of Funds under each of the above financing plans and determine the Debt/Equity ratio under each plan.