The Evans Corporation finds that it is necessary to determine its marginal cost of capital. Evans' current capital structure calls for $25$ percent debt, $10$ percent preferred stock, and $65$ percent common equity. Initially, common equity will be in the form of retained earnings $($Ke$)$ and then new common stock $($Kn$).$ The costs of the various sources of financing are as follows: debt, $6\mathrm{.}15$ percent; preferred stock, $9\mathrm{.}25$ percent; retained earnings, $11\mathrm{.}50$ percent; and new common stock, $12\mathrm{.}4$ percent.

Required:

a$)$ What is the initial weighted average cost of capital? $($Include debt, preferred stock, and common equity in the form of retained earnings, Ke$.)(4$ marks$)$

b$)$ If the firm has $$15$ million in retained earnings, at what size of investment will the firm run out of retained earnings? $(4$ marks$)$

c$)$ What will the marginal cost of capital be immediately after that point? $($Equity will remain at $60$ percent of the capital structure, but it will all be in the form of new common stock, Kn$.)(4$ marks$)$

d$)$ The $6\mathrm{.}15$ percent cost of debt referred to above applies only to the first $$35$ million of debt. After that, the cost of debt will be $7\mathrm{.}5$ percent. At what size of investment will there be a change in the cost of debt? $(4$ marks$)$

e$)$ What will the marginal cost of capital be immediately after that point? $($Consider the facts in both parts c and d$.)(4$ marks$)$