Capital corporation which has a target capital structure of

Reference no: EM13621460

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 percent, what is its optimal capital budget?

Reference no: EM13621460

Questions Cloud

Michael is single and 35 years old he is a participant in : michael is single and 35 years old. he is a participant in his employers sponsored retirement plan. how much can

Heleveton industries is 100 equity financed its current : heleveton industries is 100 equity financed. its current beta is 1.1. the expected market risk premium is 8.5 and the

What is the amount of cassadys deduction for transportation : cassady an employee of a law firm maintains an office at the principal business location of her firm. she frequently

Alicia has been working for jmm corp for 32 years alicia : alicia has been working for jmm corp. for 32 years. alicia participates in jmms defined benefit plan. under the plan

Capital corporation which has a target capital structure of : capital corporation which has a target capital structure of 40 percent debt and 60 percent common equity is evaluating

Hook industries capital structure consists solely of debt : hook industries capital structure consists solely of debt and common equity. it can issue debt at rd11 and its common

The evanec companys next expected dividend is 302 its : the evanec companys next expected dividend is 3.02 its growth rate is 5.04 its common stock now sells for 35.05. new

The evanec companys common stock now sells for 3674 new : the evanec companys common stock now sells for 36.74. new stock can be sold to net 32.26 per share. what is evanecs

A candy maker produces mints that have label weight of 20 : a candy maker produces mints that have label weight of 20 grams on each box. assume that the weight of a box of mints

User Account

All Pages