What is the breakpoint due to retained earnings being used up?

The K. Wallinger Inc. had net income after interest but before taxes of $40,000 this year. The marginal tax rate is 40 percent, and the dividend payout ratio is 30 percent. The company can raise debt at a 12 percent interest rate for any amount of debt less than $8,000. If the firm raises more than $8,000 of debt, a 15 percent rate will apply. The last dividend paid by Wallinger was $0.90. Wallinger's common stock is selling for $8.59 per share, and its expected growth rate in earnings' and dividends is 5 percent. If Wallinger issues new common stock, the notation cost incurred will be 10 percent. Wallinger will have $16,800 available in retained earnings this year. Wallinger plans to finance all capital expenditures with 30 percent debt and 70 percent equity