Suppose that TRM Consulting Services has discussed its need for capital with its investment bankers. The bankers have estimated that TRM can raise new funds in the capital markets under the following conditions:

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.

Source Range After-Tax Cost Retained Earnings Common Equity Up to 150,000 11.75% Up to 1,000,000 1,000,001 to 3,000,000 | More than 3,000,000 Up to 200,000 More than 200,000 Up to 1,000,000 1,000,001 to 2,000,000 More than 2,000,000 12.21% 12.80% 13.20% 10.80% 11.05% 5.32% 6.00% 6.50% Preferred Equity Debt