Suppose that TRM Consulting Services has discussed its need for capital

with its investment bankers. The bankers have estimated that TRM can

Source Range After$-$Tax Cost

Retained Earnings Up to $150,00010\mathrm{.}50\%$

Common Equity Up to $1,000,00010\mathrm{.}93\%$

$1,000,001$ to $3,000,00011\mathrm{.}26\%$

More than $3,000,00011\mathrm{.}85\%$

Preferred Equity Up to $200,0004\mathrm{.}86\%$

More than $200,0006\mathrm{.}25\%$

Debt Up to $10000004\mathrm{.}33\%$

$1000001$ to $20000004\mathrm{.}86\%$

More than $20000004\mathrm{.}12\%$

a$.$ Using the information from the previous problem, calculate each of

the break$-$points, including the break$-$point due to retained earnings.

b$.$ Create a chart of TRM$$s marginal WACC curve using the market$-$

value weights. Make sure that it is a perfect step function.