() Blackstone Manufacturing is looking into changing its current capital structure as follows: Target Debt 30% Preferred 20% Equity 50% The Finance Director has approached investment bankers of the possibility for the company to raise new debt financing by issuing bonds. According to investment bankers, Blackstone will be able to raise up to RM5 million bonds with 8% coupon rate, beyond which the amount of new debt would require a 9% coupon. Blackstone's 7.5% preferred stock, issued at a par value of RM100, currently sells for RM115.50. There are 3,000,000 shares of common stock outstanding with RM3.50 being the most recent dividend declared by the firm. The common stock currently trades at RM40 per share. Management projects next year's net income to be RM14,000,000 with 5% growth in the foreseeable future. Floatation costs are 4% on debt and 10% on common and preferred stock. The marginal tax rate is 30%.\f