Wingler Communications Corporation (WCC) produces airpods that sell for $28.70 per set, and this year's sales are expect

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Wingler Communications Corporation (WCC) produces airpods that
sell for $28.70 per set, and this year's sales are expected to be
460,000 units. Variable production costs for the expected sales
under present production methods are estimated at $10,500,000, and
fixed production (operating) costs at present are $1,560,000. WCC
has $4,800,000 of debt outstanding at an interest rate of 7%. There
are 240,000 shares of common stock outstanding, and there is no
preferred stock. The dividend payout ratio is 70%, and WCC is in
the 25% federal-plus-state tax bracket. WCC is a small company with
average sales of $25 million or less during the past 3 years, so it
is exempt from the interest deduction limitation.
The company is considering investing $7,200,000 in new
equipment. Sales would not increase, but variable costs per unit
would decline by 20%. Also, fixed operating costs would increase
from $1,560,000 to $1,800,000. WCC could raise the required capital
by borrowing $7,200,000 at 10% or by selling 240,000 additional
shares of common stock at $30 per share.