Suppose that TRM Consulting Services has discussed its

need for #3515

Suppose that TRM Consulting Services has discussed its need for capital with its investment
bankers. The bankers have estimated that TRM can raise new funds in the capital markets
under the following conditions:Source Range After-Tax CostRetained
Earnings.................................. Up to 150,000....................... 9.69%Common
Equity.................................. Up to
1,000,000......................10.10%..............................................1,000,001 to
3,000,000...................... 10.75%.................................................More than
3,000,000...................... 11.25%Preferred Equity.................................... Up to
200,000........................ 8.33%...................................................More than
200,000........................ 8.75%Debt................................................ Up to
1,000,000........................... 5.54%................................................1,000,001 to
2,000,000........................ 6.00%.................................................More than
2,000,000......................... 6.50%a. Using the information from the previous problem, calculate
each of the break-points, including the break-point due to retained earnings.b. Create a chart of
TRM's marginal WACC curve using the market value weights. Make sure that it is a perfect step
function.View Solution:
Suppose that TRM Consulting Services has discussed its need for

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