Question: Please answer all parts ASAP Case # 4: (20 Marks) Toronto Sports Limited Toronto Sports Limited (TSL), a supplier of high-end fitness equipment, has some

Please answer all parts ASAP

Please answer all parts ASAP Case # 4: (20 Marks) Toronto Sports

Case # 4: (20 Marks) Toronto Sports Limited Toronto Sports Limited (TSL), a supplier of high-end fitness equipment, has some investment opportunities. Due to capital rationing TSL can spend only up to $2,000,000 in new investment opportunities. TSL has the following information to consider: Investment Opportunity Schedules IRR Costs Opportunity to Invest Project A Project B Project C Project D Project E Project F 16% 14% 12% 11% 15% 18% $300,000 500,000 500,000 600,000 700,000 500,000 The preferred capital structure for TSL is: Debt @ 50%; Preferred @ 10% and Equity @ 40%. The financial manager has also determined that TSL has $120,000 available in retained earnings and they can borrow $250,000 debt without incurring additional financing costs. The cost of debt, preferred shares and equity are currently at 6%, 10% and 18% net of taxes respectively as applicable. The range of new financing costs beyond break points are: First break point: Second Break point: Debt 8%; Preferred 10% (no change) and Equity 18% Debt 10%; Preferred 10% (no change); Equity 20% Required (10 Marks) a) Compute the Weighted Average Cost of Capital (WACC) and complete the Marginal Cost of Capital (MCC) for the various range of financing b) Draw the firm's marginal cost of capital (MCC) and the Investment Opportunity Schedule (IOS) c) Which of the projects they should be selecting? Why? d) Calculate the overall cost of capital for TSL. (4 Marks) (3 Marks) (3 Marks) Case # 4: (20 Marks) Toronto Sports Limited Toronto Sports Limited (TSL), a supplier of high-end fitness equipment, has some investment opportunities. Due to capital rationing TSL can spend only up to $2,000,000 in new investment opportunities. TSL has the following information to consider: Investment Opportunity Schedules IRR Costs Opportunity to Invest Project A Project B Project C Project D Project E Project F 16% 14% 12% 11% 15% 18% $300,000 500,000 500,000 600,000 700,000 500,000 The preferred capital structure for TSL is: Debt @ 50%; Preferred @ 10% and Equity @ 40%. The financial manager has also determined that TSL has $120,000 available in retained earnings and they can borrow $250,000 debt without incurring additional financing costs. The cost of debt, preferred shares and equity are currently at 6%, 10% and 18% net of taxes respectively as applicable. The range of new financing costs beyond break points are: First break point: Second Break point: Debt 8%; Preferred 10% (no change) and Equity 18% Debt 10%; Preferred 10% (no change); Equity 20% Required (10 Marks) a) Compute the Weighted Average Cost of Capital (WACC) and complete the Marginal Cost of Capital (MCC) for the various range of financing b) Draw the firm's marginal cost of capital (MCC) and the Investment Opportunity Schedule (IOS) c) Which of the projects they should be selecting? Why? d) Calculate the overall cost of capital for TSL. (4 Marks)

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