Suppose a company is trying to raise 100 millionExampleCompany has access to:Source of fundingCost quoted, %Bank loans- for loans $20 million but $50,000,000Note 2: Government

Suppose a company is trying to raise 100 millionExampleCompany has access to:Source of fundingCost quoted, %Bank loans- for loans <= $20 million5.50%- for amount >$20 million but <= $50 million8.00%Private equity12.00%Government investment equity- up to $10 million5.00%Consider company WACCAssume:Share of fundingDebtPEGE50%40%10%Check100%3.50%4.80%0.50%Tax shields:25%0%0%Net (of tax shield) costs:2.63%4.80%0.50%Step 1:Since Government Equity is cheaper than any other source of funding, the company takes full $10 million tranche, which is 10% of capital required.Step 2:Bank loans are second and third cheapest, so the company takes full $20 million available at 5.5% and additional $30 million at 8%Step 3:The company takes the balance of capital required in Private Equity: $100 million - $10 million GE - $50 million bank loans = $40 million at 12%Tax shield: 25% on debt, none on GE and none on PECompany WACC (with GE)8.80%- after-tax WACC (with GE):7.925%Company WACC (w/o GE)9.50%- after-tax WACC (with GE):8.625%For the purpose of Assignment 1, Question 1, assume:Bank rate for a loan up to $20 millionBank rate for a loan over $20 million up to $50 millionPrivate EquityGovernment funds are available up to $20 millionNo Government funds availableScenario 1A10.0%10.0%12.0%5.0%Scenario 2A10.0%11.0%12.0%5.0%Scenario 3A10.0%12.0%12.0%5.0%Scenario 4A10.0%13.0%12.0%5.0%Scenario 5A10.0%14.0%12.0%5.0%Scenario 6A10.0%15.0%12.0%5.0%Scenario 7A10.0%16.0%12.0%5.0%Scenario 8A10.0%17.0%12.0%5.0%Scenario 1C15.0%16.0%14.0%9.0%Scenario 2C15.0%17.0%14.0%9.0%Scenario 3C15.0%18.0%14.0%9.0%Scenario 4C15.0%19.0%14.0%9.0%Scenario 5C15.0%20.0%14.0%9.0%Scenario 6C15.0%21.0%14.0%9.0%Scenario 7C15.0%22.0%14.0%9.0%Scenario 8C15.0%23.0%14.0%9.0%Note 1: Bank will not lend > $50,000,000Note 2: Government will not invest > $20,000,000,Provide analysis of the company WACC and optimal capital structure under different sets of Scenarios A and C.Note 1: you should remember to provide calculations and analysis for cases with Government Equity (GE) and Without GE, so overall you will have 4 sets of Scenarios (2 for A with/without GE and 2 for C with/without GE) and a total number of 32 cases (8 for A with GE, 8 for A without GE, 8 for C with GE, and 8 for C without GE).Make sure you visualize your calculations and that your visualizations support your analysis.How do changes in interest rates across bank loans, Private Equity and Government funds change / influence company WACC and optimal capital structure?How does availability or lack of availability of Government funding change company WACC and optimal capital structure?Note 2: In calculating WACC for all scenarios, focus only on after tax cost of debt (with tax shield in place). Do not run scenarios without a tax shield