. ROGERS 9:41 AM @ 38% Inbox The management of Omega Ltd. is trying to decide between various projects and needs to know the marginal cost of capital for various ranges of financing. The following information pertains to Delta Ltd.: 25% 2% 3% 5% $4.00 Tax rate Yield on bonds issued, up to $600,000 Yield on bonds issued over $600,000 Flotation cost for bonds Dividend on common shares at the end of the last year Price of common shares Expected growth in earnings Retained earnings available in the form of cash Dividend on preferred shares Price of preferred shares Flotation cost for both common and preferred shares % of debt in capital structure % of preferred shares in capital $50 2.5% $350,000 $2.50 $45 3% 40% 10% B course info ... ROGERS * 9:41 AM @ 38% Inbox $2.50 $45 3% Dividend on preferred shares Price of preferred shares Flotation cost for both common and preferred shares % of debt in capital structure % of preferred shares in capital structure % of common equity in capital structure 40% 10% 50% 1. Calculate the cost of retained earnings. (2 marks) 2. Calculate the cost of new common shares. (2 marks) 3. Calculate the cost of new preferred shares. (2 marks) 4. Calculate the cost of debt for new bonds up to $600,000. (2 marks) 5. Calculate the value of the largest project that could be funded using the $350,000 of available retained earnings. (2 marks) course info .. ROGERS 9:41 AM @ 38% Inbox 2. Calculate the cost of new common shares. (2 marks) 3. Calculate the cost of new preferred shares. (2 marks) 4. Calculate the cost of debt for new bonds up to $600,000. (2 marks) 5. Calculate the value of the largest project that could be funded using the $350,000 of available retained earnings. (2 marks) 6. Calculate the largest project that could be funded using the lower cost 2% debt. (2 marks) 7. Calculate the marginal cost of capital for amounts up to the amount calculated in #5. marks) (2 8. Calculate the marginal cost of capital for amounts between the amounts calculated in #5 and #6. (2 marks) 9. Calculate the marginal cost of capital for amounts above the amount calculated in #6. (2 marks) course info