The management of a conservative firm has adopted a policy of never letting debt exceed 40 percent of total financing. The firm will earn $12,000,000 but distribute 30 percent in dividends, so the firm will have $8,400,000 to add to retained earnings. Currentiy the price of the stock is $50; the company pays a $2 per share dividend, which is expectied to grow annually at 8 percent, tf the company sells new shares, the net to the company wal be $48. Given this information, what is the a. cont of retained earnings? Round your answer to one decimal place. b. cost of new common stock? Round your answer to one decimal place. \% The rate of interest on the firm's long-term debt is 11 percent and the firm is in the 32 percent income tax bracket. If the firm issues more than $2,300,000, the interest rate will rise 12 percent, Given this information, what is the c. cost of debt? Rosund your aeswer to one decimal place. d. cost of debt in excess of $2,300,0007 Round your answer to one decimal place. 46 The firm rases funds in increments of \$2,300,000 consiving of \$590,000 in debt and \$1,610,000 in equity. This strategy maintains the capital structure of 30 percent debt and 70 percent equity, Develop the marginsl cost of capital schedvie through $11,000,000. Round your answers for the break points to the nearest doliar and for the marginal costs to one decimal place. The marginal cost of captal scheduie: 10 - 5 cost of debt: is cont of equity: is cost of capital: 5 5 1 cost of debt: cont of equity: cost of capitat: above \$ cost of debt: \% cost of equity: % cost of capital: 4 What impact would each of the following have on the marginal cost of captal schedule? . the firm's income tax rate increases If income tax rates were to rise, the effective cost of debt would . and the marginal cost of capital would at all levels. t, the firm retains all of its earnings and the price of the stock is unuffected, Round your answers for the break-point to the nearest dollar and for the marginal costs to one decimal place The marginal cost of capital schedule: 9. $11,000,000 is insufficient to meet attractive investment opoortunities If the firm needs more than $11,000,000 that fact the marginal cost of capitat schedule