You are given the following data for a company: Cost of debt = 8%, cost of retained

Question:

You are given the following data for a company: = 8%, cost of retained earnings = 12%, cost of new common equity = 14%, tax rate = 35% and retained earnings = $1000. The firms target is 40% debt and 60% common equity. Compute the following:
A. Retained earnings break point
B. WACC below the RE break point
C. WACC above the RE break point
Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a... Cost Of Debt
The cost of debt is the effective interest rate a company pays on its debts. It’s the cost of debt, such as bonds and loans, among others. The cost of debt often refers to before-tax cost of debt, which is the company's cost of debt before taking...