Amsterdand industries has a target capitsl structure of 60% common equity , 30% debt, and and 10 % preferred stock. The cost of retained earnings is 15 % ,and the cost of new equity (external) is 16%. Amstar Anticipates having$ 28 million of new retained earnings available over the coming year. Amstar Industries can sell $10 million of first-morgage bonds with an after cost of 19%. Any additional debt will have an after-tax cost of 9.5%. The cost of preffered equity is 14%
a. Determine the break point in the cost of capital schedule and compute all the marginal cost of capital for Amstar industries at each break point.
show workings , formulas and drawing.