Suppose that TRM Consulting Services has discussed its need for capital with its investment bankers. The bankers
Question:
a. Using the information from the previous problem, calculate each of the break-points, including the break-point due to retained earnings.
b. Create a chart of TRM's marginal WACC curve using the market-value weights. Make sure that it is a perfect step function.
Transcribed Image Text:
Source Range After-Tax Cost Retained Earnings Common Equity Up to 150,000 11.75% Up to 1,000,000 1,000,001 to 3,000,000 | More than 3,000,000 Up to 200,000 More than 200,000 Up to 1,000,000 1,000,001 to 2,000,000 More than 2,000,000 12.21% 12.80% 13.20% 10.80% 11.05% 5.32% 6.00% 6.50% Preferred Equity Debt
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Related Book For
Financial Analysis with Microsoft Excel
ISBN: 978-1285432274
7th edition
Authors: Timothy R. Mayes, Todd M. Shank
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