E-Games 4 U Corporation is evaluating some capital investments for the coming year. Since capital investments are a key factor for the firm's wealth creation, The board of directors has assigned you with finding the break points in their capital structure so that in the future they calculate properly the cost of capital. The firm has 1,590,966 common shares outstanding and can borrow up to $33,571,483 in new debt before the interest rate increases; the firm can then borrow any amount at the higher rate. Taxes are 31.6% and debt is 47% of the target capital structure. In addition, the firm forecast EPS of $21 for the current fiscal year and plans to continue with its historical dividend payout ratio of 35%. The firm does not use preferred equity. Hint: with the data above you can calculate retained earnings. Calculate the break point in the MCC schedule for Common Equity.
