4 4 2. 3. ABC, Ltd. Has the following capital structure. < Debt 4 0.35* 0.25+...

 

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4 4 2. 3. ABC, Ltd. Has the following capital structure.< Debt 4 0.35* 0.25+ 0.40 Preferred Stock Common Equity a. The after tax cost of debt is 9.6%, the cost of preferred stock is 5%, and the cost of common equity (in the form of retained earnings) is 12%. If costs the firm 15.5% to issue new common. Assuming the firm's common equity consists of retained earnings, find the weighted average cost of capital (WACC).< b. If ABC, Ltd. Has $3,200,000 in retained earnings, find the breakpoint or size of investment in dollars at which the firm will run out of retained earnings and will have to issue new common. c. Find the marginal cost of capital after the firm has run out of retained earnings and issued new common.< L 4 4 2. 3. ABC, Ltd. Has the following capital structure.< Debt 4 0.35* 0.25+ 0.40 Preferred Stock Common Equity a. The after tax cost of debt is 9.6%, the cost of preferred stock is 5%, and the cost of common equity (in the form of retained earnings) is 12%. If costs the firm 15.5% to issue new common. Assuming the firm's common equity consists of retained earnings, find the weighted average cost of capital (WACC).< b. If ABC, Ltd. Has $3,200,000 in retained earnings, find the breakpoint or size of investment in dollars at which the firm will run out of retained earnings and will have to issue new common. c. Find the marginal cost of capital after the firm has run out of retained earnings and issued new common.< L

Answer rating: 100% (QA)

3WACC 96035 5025 1204 941 bAmount in Retained Earnin... View the full answer