please answer number 3 when the flotation cost increases to 6%

COST OF CAPITAL CASE The balance sheet that follows indicates the optimum capital structure for Nealon Inc. Flotation costs are (a) 3 % of market value for a new bond issue, and (b) $1.00 per share for preferred stock. The dividends for common stpck were $2.50 last year ten years ago the dividends were 1.40 per share. The firm is in a 34 percent tax bracket. What is the weighted average cost of capital if the fim's finances are in the following proportions? Percentage of Future Financing Type of Financing Bonds (8%, $1,000 par, 26-year maturity) Preferred stock (5,000 shares outstanding, $50 par, $1.50 dividend) Common equity ($1 par) market value $35 %001 1. Market prices are $1,135 for bonds, $19 for preferred stock, and $35 for common stock Flotation cost of bonds up to $2,000,000 of bonds is 3 %. More than $2M, the flotation cost increase to 6% The company would obtain the first $1,000,000 of equity from retained earnings. Equity above $1M would be obtained from the sale of new common stock. (79% flotation 2. 3. 4. 5. (asoo Calculate the component cost of each type of capital. b. Calculate the $ levels at which the cost of capital would change And calculate the WACC at each level. COST OF CAPITAL CASE The balance sheet that follows indicates the optimum capital structure for Nealon Inc. Flotation costs are (a) 3 % of market value for a new bond issue, and (b) $1.00 per share for preferred stock. The dividends for common stpck were $2.50 last year ten years ago the dividends were 1.40 per share. The firm is in a 34 percent tax bracket. What is the weighted average cost of capital if the fim's finances are in the following proportions? Percentage of Future Financing Type of Financing Bonds (8%, $1,000 par, 26-year maturity) Preferred stock (5,000 shares outstanding, $50 par, $1.50 dividend) Common equity ($1 par) market value $35 %001 1. Market prices are $1,135 for bonds, $19 for preferred stock, and $35 for common stock Flotation cost of bonds up to $2,000,000 of bonds is 3 %. More than $2M, the flotation cost increase to 6% The company would obtain the first $1,000,000 of equity from retained earnings. Equity above $1M would be obtained from the sale of new common stock. (79% flotation 2. 3. 4. 5. (asoo Calculate the component cost of each type of capital. b. Calculate the $ levels at which the cost of capital would change And calculate the WACC at each level