Why Max Solutions's target capital structure calls for 40 percent debt, 10 percent preferred stock, and 50 percent common equity. WMS's current after-tax cost of debt is 6 percent, and it can sell as much debt as it wishes at this rate. The firm's cost of preferred stock is 11 percent, and its cost of retained earnings is 14 percent. The firm expects to generate $15,000 in retained earnings this year. A. Compute the weighted average cost of capital (WACC) if Why Max Solutions will rely only on Retained Earnings for the projected new year B. Should the firm exhaust its retained earnings, what will be the (WACC) breakpoint associated with raising funds through the issuance of new common stock? O 11.5%, $150,000 O 10%, $16,500 O 10.5%, $30,000 O 11%, $37,500

New Energy’s capital structure today is $1,347 million in Long Term Debt and $1,655 million in Common Equity. If its debt were issued today, New Energy would pay an interest rate of 8.2%/year (before tax). New Energy’s Cost of Equity is estimated to be 12%/year. Given a tax rate of 30%, what is New Energy’s Weighted Average Cost of Capital (WACC)? (Your answer should be a % carried to 2 places.)

Stevenson's Bakery is an all-equity firm that has projected perpetual EBIT of $183,000 per year. The cost of equity is 13.1 percent and the tax rate is 21 percent. The firm can borrow perpetual debt at 6.3 percent. Currently, the firm is considering converting to a debt–equity ratio of .93. What is the firm's levered value? MM assumptions hold.   A. $829,786   B. $1,215,262   C. $1,155,579   D. $997,511   E. $921,985

A company is trying to establish its optimal capital structure. Its current capital structure consists of 25% debt and 75% equity; however, the CEO believes that the firm should use more debt. The risk-free rate, rRF, is 6%; the market risk premium, RPM, is 6%; and the firm's tax rate is 40%. Currently, the company’s cost of equity is 14%, which is determined by the CAPM. What would be the companies estimated cost of equity if it changed its capital structure to 50% debt and 50% equity? Round your answer to two decimal places. Do not round intermediate steps.

Olsen Outfitters Inc. believes that its optimal capital structure consists of 65% common equity and 35% debt, and its tax rate is 25%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $1 million of retained earnings with a cost of rs = 10%. New common stock in an amount up to $10 million would have a cost of re = 12.0%. Furthermore, Olsen can raise up to $4 million of debt at an interest rate of rd = 10% and an additional $4 million of debt at rd = 13%. The CFO estimates that a proposed expansion would require an investment of $8.4 million. What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places.   %