Problem $11-27($Algo$)$ Marginal cost of capital $[$LO$11-5]$

Delta Corporation has the following capital structure:

a$.$ If the firm has $$52$ million in retained earnings, at what size capital structure will the firm run out of retained earnings?

Note: Enter your answer in millions of dollars $($e$.$g$.,$ $$10$ million should be entered as $"10".$

Capital structure size $(x)$

b$.$ Note: Enter your answer in millions of dollars $($e$.$g$.,$ $$10$ million should be entered as $"10".$The $9\mathrm{.}6$ percent cost of debt referred to

earlier applies only to the first $$24$ million of debt. After that the cost of debt will go up$.$ At what size capital structure will there be a

change in the cost of debt?Delta Corporation has the following capital structure:

Cost $($aftertax$)$ Weights Weighted Cost

Debt $($Kd$)9\mathrm{.}6\%30\%2\mathrm{.}88\%$

Preferred stock $($Kp$)7\mathrm{.}850\mathrm{.}39$

Common equity $($Ke$)($retained earnings$)9\mathrm{.}2655\mathrm{.}98$

Weighted average cost of capital $($Ka$)9\mathrm{.}25\%$

If the firm has $$52$ million in retained earnings, at what size capital structure will the firm run out of retained earnings?

Note: Enter your answer in millions of dollars $($e$.$g$.,$ $$10$ million should be entered as $"10".$

Note: Enter your answer in millions of dollars $($e$.$g$.,$ $$10$ million should be entered as $"10".$The $9\mathrm{.}6$ percent cost of debt referred to earlier applies only to the first $$24$ million of debt. After that the cost of debt will go up$.$ At what size capital structure will there be a change in the cost of debt?