The senior management team of your firm is investigating the financial implications of a change to the companys capital structure. The firm currently uses a combination of long-term debt and internal common equity to finance its new asset requirements. Senior management, concerned about economic events that may make borrowing difficult to obtain, is considering two options for Q9. First, borrow $4.5 million in two-year debt, three-year debt and ten-year bonds at an average cost of 4.0%. Alternatively, issue an additional 900K shares of new common stock. The team has asked you to prepare a summary report in the form of a double-spaced memo, outlining the major implications of the proposed change in strategy.

Create a table which compares the weights and the WACC for Q9 based upon the two capital structure proposals. Use Table 1 (Required) as a guide. Assume the cost of new debt for the upcoming quarter is 4.00% and the estimated cost of equity is 6.00% (Bond Yield = 4.00% plus Risk Premium = 2%). Based upon this analysis, what are the potential long-term cost implications for the firm?

Table 1Current versus Proposed Capital Structure
	Debt	Common Stock	Absolute Change	Percent Change
Weight of Debt	13.94%	5.44%	8.49%	(60.95%)
Weight of Equity	?	?	?	?
WACC (Annual)	?	?	?	?
Available to Common	?	?	?	?
ROE (Annual)	?	?	?	?
ROA (Annual)	?	?	?	?
EPS	?	?	?	?
MV for Q9	$20.8 million	$30.36 million	$9.56 million	45.98%