The McGee Corporation finds it is necessary to determine its marginal cost of capital. McGee's current capital structure calls for $50$

percent debt, $20$ percent preferred stock, and $30$ percent common equity. Initially, common equity will be in the form of retained

earnings $(K_c)$ and then new common stock $(K_n).$ The costs of the various sources of financing are as follows: debt $($after$-$tox$),6\mathrm{.}0$

percent; preferred stock, $8\mathrm{.}0$ percent; retained earnings, $9\mathrm{.}0$ percent; and new common stock, $10\mathrm{.}2$ percent.

a$.$ What is the initiol weighted aversge cost of capitsl? $($Include debt, preferred stock, and common equity in the form of retained

earnings, $K_c.)$

Note: Do not round intermedlate calculations. Input your answers as a percent rounded to $2$ decimal places.

b$.$ If the firm hos $$21\mathrm{.}0$ million in retoined earnings, at what size copital structure will the firm run out of retained earnings?

Note: Enter your answer in millions of dollars $($e$.$g$.,$ $$10$ million should be entered as $"10").$

Capital structure size $(x)$

c$.$ What will the marginal cost of copital be immedistely after that point? $($Equity will remain at $30$ percent of the copitel structure, but

will all be in the form of new common stock, $K_n.)$

Note: Do not round Intermedlate calculations. Input your answer as a percent rounded to $2$ decimal places.

Marginal cost of capital

$\%$

d$.$ The $6\mathrm{.}0$ percent cost of debt referred to above applies only to the first $$50$ million of debt. After that, the cost of debt will be $11\mathrm{.}2$

percent. At what size capitel structure will there be a change in the cost of debt?

Note: Enter your answer in millions of dollars $($e$.$g$.,$ $$10$ million should be entered as $"10").$

Capital structure size $($Z$)$

e$.$ What will the marginal cost of copital be immedistely ofter that point? $($Consider the focts in both parts $c$ and $d.)$

Do not round intermedlate calculations. Input your answer as a percent rounded to $2$ declmal places.