Assuming all equity is from retained earnings

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Reference no: EM13917686

Nolan Corp is trying to determine its weighted average cost of capital. Nolan's current capital structure is: 45% Debt 15% Preferred 40% Common Equity Common Equity (in the form of retained earnings...Ke) costs 12% Common Equity (in the form of new issue common stock...Kn) costs 13.2% Debt (Kd) costs 5.6% Preferred (Kp) costs 9% A - What is the initial WACC (assuming all Equity is from retained earnings)? B - If the firm has $12 Million in retained earnings, at what level of capital investment will the firm run out of retained earnings? C - At the point just above the level determined in part B, what will the new WACC be? D - Assume that the firm's cost of debt (Kd) increases to 7.2%, after the firm has taken on $18 Million of new debt. At what level of capital investment will there be an increase in the cost of debt? E - At the point just above the level determined in part D, what will the new WACC be?

Reference no: EM13917686

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