Question Delta Corporation has the following capital structure: Weighted cast Debt (d) Preferred stock (Kp) Common equity (Ke) (retained earnings) Weighted average cost of capital (ka) Cost (afterta) Weights 10.1% 20% 11.2 15 8.1 65 2.82% 1.68 5.27 8.97% a. If the firm has $39 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 10.1 percent cost of debt referre ito earlier applies only to the first $13 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

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Transcribed Image Text: Delta Corporation has the following capital structure: Weighted cast Debt (d) Preferred stock (Kp) Common equity (Ke) (retained earnings) Weighted average cost of capital (ka) Cost (afterta) Weights 10.1% 20% 11.2 15 8.1 65 2.82% 1.68 5.27 8.97% a. If the firm has $39 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 10.1 percent cost of debt referre ito earlier applies only to the first $13 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
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Transcribed Image Text: Delta Corporation has the following capital structure: Weighted cast Debt (d) Preferred stock (Kp) Common equity (Ke) (retained earnings) Weighted average cost of capital (ka) Cost (afterta) Weights 10.1% 20% 11.2 15 8.1 65 2.82% 1.68 5.27 8.97% a. If the firm has $39 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 10.1 percent cost of debt referre ito earlier applies only to the first $13 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