S&P Corporation (SPC) has an optimal capital structure of 40 percent debt and 60 percent equity. given the information below, calculate the margin cost of capital schedule and the optimal capital capital budget. How much is the optimal capital budget and what is the corporate cost of capital?

5 Year ago, the company issued callable bonds that pay semiannual payment with 6.5% annual coupon rate and sold them at par value(1,000) however each bond is currently selling at 1040 and has 15 years remaining to maturity.

SPC's current stock price is 50.00, its long run growth rate is 3% and its expected earnings per share(EPS1) is $4. The company retains 20% of its earnings to fund future growth.

There are 102.5 million common shares outstanding.

New common stock may be issued with 5 percent floatation cost

SPC has the following investment opportunity schedule (IOS)

Project IRR cost(millions)

A 15.2% 20

B 12.5% 55

C 9% 45

D 7.5% 40

E 6.0% 50