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
what is the price of the share net sales Rs.120lakhs net profit margin 12.5% no. of equity shares 25,000 cost of equity shares 12% retention ratio 40% rate of interest(ROI) 16%

Example of Stock Market Index The following six companies constitute the index of democratic republic of Kusadikika.             Company  A  B

AsStudents will analyze and synthesize the financial reports of an organization of their choice and present their findings in a PowerPoint presentation (with completed Notes sectio

After read all the available information carefully, prepare a two page (double-spaced) essay and answer the following questions: Assume that we have the following data: C=100+0.50Y

Determine the Functions of New Issue Market The key function of new issue market is to facilitate transfer resources from savers to the users. Savers are individuals, insura

1. Suppose company A expects to increase unit sales of i-phone by 15% per year for the next 5 years. If you currently sell 3 million i-phones in one year, how many phones do you ex

What is cash deficit?And what is cash surplus?Describe each of them in detail.

Problem 1 a) Explain Trade Liberalisation and give your views whether emerging economies should adopt trade liberalization protectionist measures to attain economic growth.

The Jacobs company needs to acquire a new lift truck for transporting its final product to the warehouse. One alternative is to purchase the truck for $45,000. Maintenance of th

Dividend yield or Gordon's Model This model is used to determine the cost of various capital components in particular: Cost of equity - K e Cost of preferenc