Firms target capital structure-debt and common equity

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Reference no: EM13847155

You are given the following data for a company: Cost of debt = 8%, cost of retained earnings = 12%, cost of new common equity = 14%, tax rate = 35% and retained earnings = $1000. The firms target capital structure 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:

Reference no: EM13847155

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