The Hamilton Corporation has $600,000 available in retained earnings.

Assuming there is no change to the companys capital structure, at what size capital budget will the

companys weighted average cost of capital increase?

Percent of capital structure:

Debt 35%

Preferred stock 20%

Common equity 45%

Additional information:

Bond coupon rate 11%

Bond yield to maturity 9%

Dividend, expected common $5.00

Dividend, preferred $ 12.00

Price, common $ 60.00

Price, preferred $106.00

Flotation cost, preferred $4.50

Growth rate 6%

Corporate tax rate 35%

Floatation cost, common $3.00

Calculate the weighted average cost of capital for the company - both before and

after the increase in the cost of capital curve.