**Transcription for Educational Website:**---The Nolan Corporation finds it necessary to determine its marginal cost of capital. Nolan’s current capital structure consists of 35 percent debt, 25 percent preferred stock, and 40 percent common equity. Initially, common equity will be in the form of retained earnings (Ke) and then new common stock (Kn). The costs of the various sources of financing are as follows: debt (after-tax), 6.2 percent; preferred stock, 8 percent; retained earnings, 11 percent; and new common stock, 12.2 percent.**a. What is the initial weighted average cost of capital?** (Include debt, preferred stock, and common equity in the form of retained earnings, Ke) **(Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)**| | Weighted Cost ||-----------------------------|---------------|| Debt | % || Preferred stock | % || Common equity | % || Weighted average cost of capital | 0.00 % |**b. If the firm has $28 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 |---

The individual weight of the various element of the capital structure(debt, preferred equity, and…

Answered: The Nolan Corporation finds it is…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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