SOLVE PROBLEM TO ANSWER QUESTION: The McGee Corporation finds it is necessary to determine its marginal cost of capital. McGee$$s current capital structure calls for $40$ percent debt, $10$ percent preferred stock, and $50$ percent common equity. Initially, common equity will be in the form of retained earnings $($Ke$)$ and then new common stock $($Kn$).$ The costs of the various sources of financing are as follows: debt $($after$-$tax$),6\mathrm{.}4$ percent; preferred stock $($Kp$),11\mathrm{.}0$ percent, retained earnings, $($Ke$)11\mathrm{.}0$ percent; and new common stock, $($Kn$)12\mathrm{.}2$ percent. What is the initial weighted average cost of capital? $($Include debt, preferred stock, and common equity in the form of retained earnings, Ke

What is the initial weighted average cost of capital $?$

If the firm has $$32\mathrm{.}5$ million in retained earnings, at what size capital structure will the firm run out of retained earnings?

What will the marginal cost of capital be immediately after that point? $($Equity will remain at $50$ percent of the capital structure, but will all be in the form of new common stock, $($Kn$)$

The $6\mathrm{.}4$ percent cost of debt referred to above applies only to the first $$58$ million of debt. After that, the cost of debt will be $8\mathrm{.}4$ percent. At what size capital structure will there be a change in the cost of debt?

What will the marginal cost of capital be immediately after that point? $($Consider the facts in both parts $4$ and $5)$

why do you see a change in the Cost of Caption in #$1,$ #$3,$ #$5?$ what variable changed the situation?