Wingler Communications Corporation (WCC) produces airpods that sell for $28.60 per set, and this year's sales are expect

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Wingler Communications Corporation (WCC) produces airpods thatsell for $28.60 per set, and this year's sales are expected to be440,000 units. Variable production costs for the expected salesunder present production methods are estimated at $10,100,000, andfixed production (operating) costs at present are $1,560,000. WCChas $4,800,000 of debt outstanding at an interest rate of 7%. Thereare 240,000 shares of common stock outstanding, and there is nopreferred stock. The dividend payout ratio is 70%, and WCC is inthe 25% federal-plus-state tax bracket. WCC is a small company withaverage sales of $25 million or less during the past 3 years, so itis exempt from the interest deduction limitation.
The company is considering investing $7,200,000 in newequipment. Sales would not increase, but variable costs per unitwould decline by 20%. Also, fixed operating costs would increasefrom $1,560,000 to $1,800,000. WCC could raise the required capitalby borrowing $7,200,000 at 10% or by selling 240,000 additionalshares of common stock at $30 per share.