Amount to be retained and available for capital expenditure = 5000000*(1-55%) = | $ 2,250,000 |
Total equity required = 20000000*65% = | $ 13,000,000 |
External equity required = 13000000-2250000 = | $ 10,750,000 |
external equity financing 14-5 EXTERNAL EQUITY FINANCING Coastal Carolina Heating and Cooling Inc. has a 6-month...
Coastal Carolina Heating and Cooling Inc. has a 6-month backlog of orders for its patented solar heating system. To meet this demand, management plans to expand production capacity by 35% with a $10 million investment in plant and machinery. The firm wants to maintain a 45% debt level in its capital structure. It also wants to maintain its past dividend policy of distributing 45% of last year's net income. In 2016, net income was $5 million. How much external equity...
eBook Coastal Carolina Heating and Cooling Inc. has a 6-month backlog of orders for its patented solar heating system. To meet this demand, management plans to expand production capacity by 25% with a $15 million investment in plant and machinery. The firm wants to maintain a 40% debt level in its capital structure. It also wants to maintain its past dividend policy of distributing 50% of last year's net income. In 2018, net income was $5 million. How much external...
16.3-16.6 16-3 16-4 Intermediate Problems 4-6 16-5 STOCK REPURCHASES Beta Industries has net income of $2,000,000, and it has 1,000,000 shares of common stock outstanding. The company's stock currently trades at $32 a share. Beta is considering a plan in which it will use available cash to repurchase 20% of its shares in the open market. The repurchase is expected to have no effect on net income or its stock price. What will be Beta's EPS following the stock repurchase?...
External Equity Financing Gardial GreenLights, a manufacturer of energy-efficient lighting solutions, has had such success with its new products that it is planning to substantially expand its manufacturing capacity with a $15 million investment in new machinery. Gardial plans to maintain its current 30% debt-to-total-assets ratio for its capital structure and to maintain its dividend policy in which at the end of each year it distributes 55% of the year’s net income. This year’s net income was $8 million. How much...
Reed Corporation has a capital budget of $2.25 million. The company wants to maintain a target capital structure which is 60% debt and 40% equity. The company forecasts that its net income this year will be $800,000.a. If the firm uses a payout ratio of 25%, what dividend will Reed pay?b. How much will be added to retained earnings?c. If the company wishes to maintain its debt-equity ratio to finance the capital budget, how much debt must the firm issue?d. ...
Desert A/C plans to invest $50 million to expand operations. The firm wants to maintain a 60 percent debt/assets ratio in its capital structure. If net income is expected to be $25 million this year and Desert follows the residual dividend policy, what amount of dividends will be paid this year?
(Financial forecastinglong dashdiscretionary financing needs) J. T. Jarmon, Inc. has been in business for only 1 year, and the CFO expects that the relationship between firm sales and its operating expenses, current assets, net fixed assets, and current liabilities will remain at their current proportion of sales. Last year, Jarmon had $13 million in sales and net income of $1.30 million. The firm anticipates that next year's sales will reach $16.250 million, with net income rising to $1.43 million. Given...
Assume the tax rate is 21%. State Liquor is an all-equity financing firm. It has restructured to include $1 million in permanent debt with an interest rate of 7%. According to MM 1963 proposition, the value of the firm will increase by due to this change in its capital structure. $70,000 $700,000 0 $35,000 $210,000
(Financial forecasting—discretionary financing needs) J. T. Jarmon, Inc. has been in business for only 1 year, and the CFO expects that the relationship between firm sales and its operating expenses, current assets, net fixed assets, and current liabilities will remain at their current proportion of sales.Last year, Jarmon had $11 million in sales and net income of $1.10 million. The firm anticipates that next year's sales will reach $13.750 million, with net income rising to $1.21 million. Given its present high rate of growth, the firm retains all...
The firm you are following as an analyst has FCFE of 500 million dollars for this year. It's before-tax cost of debt is 5 percent... 1. The firm, you are following as an analysist, has FCFE of 500 million dollars for this year. Its before- tax cost of debt is 5 percent, and its required rate of return for equity is 11 percent. The company expects a target capital structure consisting of 20 percent debt financing and 80 percent equity...