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The McGee Corporation finds it is necessary to determine its marginal cost of capital. McGee’s current capital structure calls for 50 percent debt, 20 percent preferred stock, and 30 percent common equity. Initially, common equity will be in the form of retained earnings (Ke) and then new common stock (Kn). The costs of the various sources of financing are as follows: debt, 6.0 percent; preferred stock, 8.0 percent; retained earnings, 9.0 percent; and new common stock, 10.2 percent. a. What is the initial weighted average cost of capital? (Include debt, preferred stock, and common equity in the form of retained earnings, Ke.) (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.) b. If the firm has $34.5 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").) c. What will the marginal cost of capital be immediately after that point? (Equity will remain at 30 percent of the capital structure, but will all be in the form of new common stock, Kn.) (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) d. The 6.0 percent cost of debt referred to above applies only to the first $35 million of debt. After that, the cost of debt will be 11.2 percent. 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").) e. What will the marginal cost of capital be immediately after that point? (Consider the facts in both parts c and d.) (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
The rest is retained and invested in projects that earn a 20% rate of return per year. This situation is expected to continue indefinitely.
Mike currently 35, has $15,000 saved for retirement. How much would be shortfall or excess in his retirement account?
Which of the following are NOT include in the incremental cash flows for a project?
Discuss in detail one impact of inflation on either personal finance or on the economy in general.
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A process model to estimate biodiesel production costs
Your cousin wants to buy a car but he really can’t afford it. He needs a loan of $22,000. The finance manager at the dealership offers him something like a loan in which your cousin will get the $22,000 and will pay $413 per month for the next 60 mon..
What type of organizations might use each of the methods and why?
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