Question

24) Delta Corporation has the following capital structure:   Cost
(aftertax)WeightsWeighted
Cost  Debt (K_d) 7.5% 15% 1.13%  Preferred stock (K_p) 6.2  10  0.62   Common equity (K_e) (retained earnings) 8.5  75  6.38          Weighted average cost of capital (K_a)       8.12%         a.If the firm has $48 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 7.5 percent cost of debt referred to earlier applies only to the first $15 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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