Saint Leo Manufacturing is going to introduce a new product line and to accomplish thisit has four projects analyzed in which it wants to invest a total of $100 million. Your job is tofind what it will cost to raise this amount of capital and based on the cost of capital determine which of theprojects should be accepted by the firm to invest in.PROJECTSA B C DINVESTMENT $30,000,000 $20,000,000 $25,000,000 $25,000,000EXPECTED RETURN 10.00% 14.00% 11.50% 16.00%The firms capital structure consists of: FMVCAPITAL PERCENTAGE AMOUNTDEBT 40% $20,000,000PREFERRED STOCK 15% $7,500,000COMMON STOCK 45% $22,500,000$50,000,000Other information about the firm:CORPORATE TAX RATE 35%DEBTCURRENT PRICE $1,075.00ANNUAL INTEREST 6.00% CURRENT INTEREST PAID SEMIANNUALLYORIGINAL MATURITY 25 YEARS, BUT NOW 20 YEARS LEFTMATURITY VALUE $1,000.00FLOTATION COST INSIGNIFICANTMARKET YIELD PROJECTED:UP TO $20 MILLION 9%ABOVE $20 MILLION 12% 3 % additional premiumPREFERREDCURRENT PRICE $35.00LAST DIVIDEND (D0) 2.63 FIXED AT 7.5% OF PARFLOTATION COST $1.00NEXT DIVIDEND (D1) $2.63COMMONCURRENT PRICE $25.00LAST DIVIDEND (D0) $1.00RETAINED EARNINGS $10,000,000GROWTH RATE (g) 9%FLOTATION COST $1.50NEXT DIVIDEND (D1) $1.090NOTE – Once retained earnings is maxed out new common stock will need to be issued.Any preferred stock would be new preferred stock. You may want to review case in chapter 11.REQUIRED:In all of the required parts one part builds on the previous part. If you can’t do a part use theset of other numbers to solve the next part.a. What is the current Kd, Kp and Ke assuming no new debt or stock?b. Since any new capital investment will require issuing new perferred stock, what would thethe new returns be preferred stock (knp) and the new cost of capital?c. What amount of increase (marginal cost of capital) in capital structure will the firm runout of retained earnings and be forced to issue new common stock?d. If new common stock has to be issued what will the new return required be (Kne) and thenew cost of capital?Note: All Answers Should Be Taken Out to 2 Decimal Places, Especially the Interest Rate Answers.Part aCurrent priceMaturity valueInterest paymentPayment periodsYield rate six month rateAnnual yield annual rateKdKpKeCurrent Cost of capitalPart bUse your solutions in Part a to do this part, but if you couldn’t complete Part a, assume Kd=4%, Kp=8%, and Ke=13%; =Knp preferred stockNew cost of capitalPart cIf the capital structure increases more thannew common stock will have to be issued to finance new projects since internally generated RE runs out,and the required return on common stock will increase as demanded by shareholders.Part dKne common stockIf you could not come up with the Kne common stock returns, do the cost of capital assuming Kd=5%, Knp=9%, and Ke=14%=New cost of capital