The Ritter Wildcat Company forecasts the following capital structure as of December 31, 2010: Debt (at 6.5%) Preferred (at 6.5%) $12,000,000 4,000,000 37seerun Common Stock Retained Earnings Total Capitalization $4,000,000 $12,000,000 dust Common Equity 32,000,000 Earnings per share have grown steadily from $0.93 in 2000 to $2 estimated for 2010. Ex growth to continue, the investment community has applied a price/earnings ratio of 10 to yield a current market price of $20. Ritter's last annual dividend was $1. dividend to grow at the same rate as earnings. The addition to retained earnings for 2010 is projected at $4 million; these funds will percent 25, and the company expects the be available during the next budget year. The corporate tax rate is 40 Assuming that the capital structure relation set out above is maintained, new securities can be sold at the following costs: Bonds: Up to and indluding $3 million of new bonds, 10 percent yield to investor on all new bonds From S301 million to S6 million of new bonds, 10.5% percent yield bonds to investor on this increment of r $6 million of new bonds, 12 percent yield to investor on this increment of new bonds Preferred: Up to and including $1 million of preferred stock, 10 percent yield to investor on all new preferred stock From S1 01 millionto 2 million of preferred stock, 10.5% percent yield to investor on this increment of preferred stock Over $2 million of preferred stock, 12.5 percent yield to investor on this increment of preferred stock. Common: Up to $4 million of new outside common stock, $20 a share less $2.50 a share flotation cost. Over $4 million of new outside common stock, $20 a share less $5 a share flotation cost on this increment of new common. a At what dollar amounts of new capital will breaks occur in the MCC? b. Calculate the MCC in the intervals between each of these breaks; then plot the MCC schedule. c. Assume now that Ritter has the following investment opportunities: 1. It can invest any amount up to $4 million at a 15% rate of return. 2. It can invest an additional $8 million at a 13.7% rate of return. 3- It can invest still another $12 million at an 11.8% rate of return. Thus Ritter's total potential capital budget is $24 million. Determine the size of the company's optimal capital budget for the year