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Business, 13.12.2019 01:31 karmaxnagisa20

Cde inc.'s current (and optimal) capital structure is 40% debt, 10% preferred stock, and 50% common equity. cde is in the 40% tax bracket. the company can issue up to $20,000,000 in new bonds at par with a 7% coupon rate; any subsequent amount must carry a 2% premium to compensate investors for added risk. a new issue of preferred stock would pay an annual dividend of $4.00 and be priced to net the company $50.00 per share after the $3.00 per share floatation cost. the firm has $21,000,000 in change in retained earnings for the current period. cde's common stock trades at $40.00 per share and the expected dividend on the common stock at t1 is 2.00. floatation costs on a new common stock issue is $5.00 per share. the company is growing at 7% per year. what is the debt break point in the marginal cost of capital (mcc) schedule?

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