Debt and common equity in capital structure

Assignment Help Financial Management
Reference no: EM13913657

External equity financing

Northern Pacific 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 $20 million investment in plant and machinery. The firm wants to maintain a 35% debt-to-total-assets ratio in its capital structure. It also wants to maintain its past dividend policy of distributing 50% of last year's net income. In 2012, net income was $5 million. How much external equity must Northern Pacific seek at the beginning of 2013 to expand capacity as desired? Assume the firm uses only debt and common equity in its capital structure. Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest cent.

$  

Reference no: EM13913657

Standard deviation of stock returns for stock

The standard deviation of stock returns for Stock A is 40%. The standard deviation of the market return is 24%. If the correlation between Stock A and the market is 0.70, then

Identical in all respects except capital structure

New World Corp. and Old World Corp. are identical in all respects except capital structure. New World's bonds have a market value of $200 million while Old World's bonds have

What taxes must tripex pay on interest and dividend income

Tripex Consolidated Industries owns $1.5 million in 12 percent bonds of Solow Electronics Company. It also owns 100,000 shares of preferred stock of Solow, which constitutes 1

Firm has an operating cycle-average collection period

A firm has an operating cycle of 120 days, an average collection period of 40 days, and an average payment period of 30 days. The firm's average age of inventory is ________ d

Capital structure-based on current market values

Capital Co. has a capital structure, based on current market values, that consists of 40 percent debt, 3 percent preferred stock, and 57 percent common stock. If the returns r

Expected cash inflows-what is projects discounted payback

Project K costs $48,152.88, its expected cash inflows are $10,000 per year for 10 years, and its WACC is 9%. What is the project's IRR? Project K costs $35,000, its expected c

Component cost of debt for use in wacc calculation

To help finance a major expansion, Castro Chemical Company sold a noncallable bond several years ago that now has 20 years to maturity. This bond has a 9.25% annual coupon, pa

Portfolio analysis-calculate standard deviation of returns

You have been given the expected return data shown in the first table on three assets -F, G, and H- over the period 2016-2019. Expected return. Calculate the expected return o

Reviews

Write a Review

 
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd