Delta Corporation has the following capital structure: Cost

Assignment Help Finance Delta Corporation has the following capital structure: Cost

Finance

Delta Corporation has the following capital structure: Cost

Delta Corporation has the following capital structure: Cost (aftertax) Cost (aftertax) Cost (aftertax) Weights Weights Weights Weighted Weighted Weighted … Show more Delta Corporation has the following capital structure: Cost (aftertax) Cost (aftertax) Cost (aftertax) Weights Weights Weights Weighted Cost Weighted Cost Weighted Cost Debt (Kd) 8.1 % 35 % 2.84 % Preferred stock (Kp) 9.6 5 .48 Common equity (Ke) (retained earnings) 10.1 60 6.06 Weighted average cost of capital (Ka) 9.38 % a. If the firm has $18 million in retained earnings, at what size capital structure will the firm run out of retained earnings? (Enter your answer in millions of dollars (e.g., $10 million should be entered as “10”).) Capital structure size (X) $ million b. The 8.1 percent cost of debt referred to earlier applies only to the first $14 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? (Enter your answer in millions of dollars (e.g., $10 million should be entered as “10”).) Capital structure size (Z) $ million • Show less

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