The Nolan Corporation finds It Is necessary to determine its marginal cost of capital. Nolan's current capital

structure calls for $40$ percent debt, $10$ percent preferred stock, and $50$ percent common equity. Initlally,

common equity will be in the form of retained earnings $(K_e)$ and then new common stock $(K_n).$ The

costs of the varlous sources of financing are as follows: debt $($after$-$tax$),7\mathrm{.}2$ percent; preferred stock, $5$

percent; retained earnings, $12$ percent; and new common stock, $13\mathrm{.}2$ percent.

a$.$ What is the initial weighted average cost of capital? $($Include debt, preferred stock, and common equity

In the form of retained earnings, $K_e.)$

Note: Do not round Intermedlate calculatlons. Input your answers as a percent rounded to $2$ decimal

places.

b$.$ If the firm has $$29$ million in retained earnings, at what size capltal structure will the firm run out of

retalned earnings?

Note: Enter your answer In millions of clollars $($e$.$g$.,$ $$10$ milllon should be entered as $"10").$

Capital structure size $(x)$

million

c$.$ What will the marginal cost of capital be Immediately after that point? $($Equity will remain at $50$ percent

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

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

places.

d$.$ The $7\mathrm{.}2$ percent cost of debt referred to earlier applies only to the first $$44$ million of debt. After that, the

cost of debt will be $9\mathrm{.}2$ percent. At what size capltal structure will there be a change in the cost of

debt?

Note: Enter your answer In millilons of dollars $($e$.$g$.,$ $$10$ milllon should be entered as $"10").$

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

and $d.)$

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

places.