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Business, 24.07.2021 14:40 tiwaribianca475

KOA company has the capital structure as following: 40% debt, 10% preferred shares and the rest are common shares. The company is going to raise capital with the following conditions: it can borrow $400.000 with an interest rate of 10%. Higher than that amount, the interest rate is 12%. The company's public shares are currently selling at a net price of $30 after subtracting the issuance cost of $5 per share. Next year's dividend is expected to be $2.7 per share with a growth rate of 8%. Income tax is 25%, dividend payout rate is 50%. Retain earnings is expected to be $1.000.000. The price of preferred share is 100 USD and its dividend is $10. The issuance cost for this type of share is 2%, however if the amount of preferred share exceed $200.000, this cost will be increased to 4%. The company can issue any amount of common shares, with the issuance cost of $5. Construct the company's MCC graph.

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