Optimal Capital Budgeting, Finance Basics

Capital Corporation, which has a target capital structure of 40 percent debt and 60 percent common equity, is evaluating an expansion project with an 8.5 percent IRR. The project costs $6 million, and any portion of it can be purchased. The firm expects to retain $4.8 million of earnings this year. It can raise up to $2 million in new debt with rd=6%; all debt above $2 million will have rd=8%;rs=11%; and re=14% for any amount of new common stock that is issued. If the firm''s marginal tax rate is 35%, what is its optimal capital budget?
Posted Date: 10/16/2012 2:36:31 PM | Location : United States







Related Discussions:- Optimal Capital Budgeting, Assignment Help, Ask Question on Optimal Capital Budgeting, Get Answer, Expert's Help, Optimal Capital Budgeting Discussions

Write discussion on Optimal Capital Budgeting
Your posts are moderated
Related Questions
Debentures of Middle Asia Reasons behind Unpopularity of Debentures of middle Asia's Financial Market as: i)Their par price is an extremely high value and as such they are

DEFINE THE TERM OPTION IN DETAIL?

Example of NPV Method Resolution limited intends to purchase a machine worth Shs.1, 500,000 that will have a residue value Shs.200,000 after 5 years helpful life. The saving

a.  In the accompanying diagram (which represents the market for chocolate candy bars), the initial equilibrium is at the intersection of S1 and D1. Circle the new equilibrium if t

management and directors

DO YOU HAVE A SAMPLE BALANCE SHEET

Imagine Joy is the sales manager in a computer retail company and has summarized for each sales transaction the following information: Sales person Date of sales Uni

Importance of Working Capital Management The finance manager must understand the management of working capital since of the following purpose: a) Time devoted to working c

What are the tasks of a financial system? Three Tasks of a Financial System are as follows: 1. Decreasing transaction costs 2. Decreasing financial risk 3. Giving liqu

the nominal fee interest rate in your account is 7% your semi-annually rate of interest APY will be?