We	70%
Wd	30%
Rd	8%	to $30,000,000
Rd	12.5%	above $30,000,000
Stock Price	$25.00
Expected Dividend	$2.00
Expected Growth	3%
Flotation Cost	10%
Retained Earnings	$66,000,000
Tax	35%

1) What is the initial Weighed Average Cost of Capital (WACC) for NCC Corporation?

Cost of debt = Rdt - (.08) (1-.35) = .052= 5.2%

Cost of RE = Rs - (2/25) + 3% = (.08 + .03) = .11 = 11%

WACC = (.30) (.052) + (.70) (.11) = .0156 + .077 = .0926 = 9.26%

2) There are two breakpoints in NCC's capital structure. At what point does the first breakpoint occur?

Breakpoint 1 is equal to how much RE can be used before needing to issue new stock at higher rate.

$66,000,000 / .70 = $94,285,714.29

3) At what point does the second breakpoint occur?

The amount of debt before interest rate will increases from 8% to 12.5%

$30,000,000 / .3 = $100,000,000

4) What is the Weighted Average Cost of Capital (WACC) after the first breakpoint? The second breakpoint occurs when we have to switch from raising capital from the retained earnings to capitol raised from issuing new stock.

5) What is the WACC after the second breakpoint? Show calculations. I know 1-3 but not 4 and 5 6. The following projects are available for NCC Corporation to consider choosing.

B,D,C,A E.