If the firm has $18 million in retained earnings, at what size capital structure
ID: 2764857 • Letter: I
Question
If the firm has $18 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").)
The 8.1 percent cost of debt referred to earlier applies only to the first $14 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").)
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Delta Corporation has the following capital structure:Explanation / Answer
Capital structure size = retained earnings/weight = 18/.6 = 30m
Capital structure size= debt at which rate goes up/weight of debt = 14/.35 =40m