Problem: Given the following information:
Weight (W) Cost of Capital (K)
Debt 65% 8.50%
Preferred Stock 3% 11.20%
Retained Earnings 32% 13.50%
Common Equity 32% 14.80%
Tax rate 40%
Retained Earnings $125
Calculate:
A. Retained Earnings Breakpoint: ___________
B. Assume the firm goes to raise $250 Mil, what is the weighted average cost of capital: _________
C. Assume the firm goes to raise $500 Mil, what is the weighted average cost of capital: _________