On January 1, 2005 the total market value of the Octane Company was ₹ 60 million. During the year, the company plans to raise and invest ₹ 30 million in new projects. The firm’s present market value capital structure, shown below, is considered to be optimal. Assume that there is no short term debt. Debt CommonEquity ₹ 3,00,00,000 ₹ 3,00,00,000 Total Capital ₹ 6,00,00,000 New bonds will have an 8% coupon rate, and they will be sold at par. Common stock, currently selling at ₹ 30 a share, can be sold to net the company ₹ 27 a share. Stockholders required rate of return is estimated to be 12% consisting of a dividend yield of 4% and an expected constant growth rate of 8%. (The next expected dividend is ₹ 1.20, so, ₹ 1.20/30 = 4%) Retained Earnings for the year are estimated to be ₹ 3 million. The marginal corporate tax is 40%. a) To maintain the present capital structure, how much of the new investment must be financed by common equity? b) Howmuchoftheneedednewcommonequityfunds mustbegenerated internally? c) Calculate the cost of each of common equity component? d) Atwhatlevel of capital expenditures will the firm’s WACC increase? e) Calculate the firm’s WACC using (1) the cost of retained earnings (First breaking point) and (2) the cost of new equity (second breaking point) (3) WACC of additional funds ₹ 30 million.