5. Atlantic Intermountain Utilities (AIU) has a present capital structure (which the company feels is optimal) of 35 percent debt, 15 percent preferred stock and 50 percent common equity. The company has external financing available in the form of first-mortgage bonds with a coupon rate of 5 percent sold at par value. The company can also raise as much preferred stock financing as is necessary at an 8 percent annual rate. AIU's common stock is presently selling at $40 per share. The dividend to be paid over the coming year (D1) is expected to be $2 a share. The company has 20 million common shares outstanding. The company's past annual dividend and earnings growth rate has been 8 percent, although a 7 percent annual growth rate in earnings and dividends is expected for the foreseeable future. The company's marginal tax rate is 25 percent. Earnings available to common stockholders are expected to be $100 million. Floatation costs of new common stock are 20 percent of the amount of funds raised. a. What is the market value of firm's common equity (E)? b. What is the market value of the firm's securities (V)? c. What is the market value of the firm's preferred stock (Pf) ? d. What is the market value of the firm's bonds ( B )? e. How much internal equity will be available to fuel the capital budget? f. What is the dollar-amount of the retained earnings break point? g. What is the WACC for AIU below the retained earnings break point? h. What is the WACC above the retained earnings break point? i. Based on your answers from parts f,g and h, draw the marginal cost of capital schedule. Suppose the firm has access to the following investment opportunity schedule: j. Which of the projects above should the firm select? Based on the projects you have selected, what is the size of the capital budget? k. How much external equity must the firm raise to fund the capital budget