Retained earnings: when measuring this cost, the firm does not concern itself with the tax bracket or brokerage fees of owners. It expects to have available $100,000 of retained earnings in the coming year; once these retained earnings are exhausted, the firm will use new common stock as the form of common stock equity financing.

Q2- The firms capital structure weights used in calculating its weighted average cost of capital are shown in the table below.

Source of capital	Weight
Long term debt	20%
Preferred stock	30%
Common stock equity	50%
Total	100%

1. Calculate the single break point associated with the firms financial situation.( Hint: this point results from exhaustion of the firms retained earnings)
2. Calculate the weighted average cost of capital associated with total new financing below the break point calculated in part (1)
3. Calculate the weighted average cost of capital associated with total new financing above the break point calculated in part (1)