The target capital structure of the firm is:

Bond 30%

P/S 20%

C/E 50%

Add the following items to your information set above:

1. Projected retained earnings is $6 million

2. Up to $9 million can be raised via bond at 10% YTM. If more than $9 million is raised via debt, the YTM rises to 11%. The applicable tax rate is 40%.

3. An unlimited amount can be raised through preferred at 12% yield to investors (F=5%)

4. Common stock: expected long-term growth is 6%, D0 is $2, the current stock price is $20.00.

5. The floatation cost for new common stocks is 10%.

A. Show the breaking points below: Breaking Points Because of the increase in this component cost $ ___________ _________________________________________ $ ___________ _________________________________________ B. Show your component cost computation and fill in the blanks below: K_b is (are): K_ps is: K_RE is: K_ncs is: C. Show below your WACC computation for each interval (use the market value weight you computed above) by filling in the blanks in the table:

Component	Weight	$0 to $____	$____ to $____	Over $____
Debt	30%
Preferred Stock	20%
Common Stock	50%
MCC	100%	%	%	%

D. MCC Schedule

CoC (%)
							$ Capital