Capital expenditure program

Assignment Help Financial Management

Reference no: EM131176560

Berea Resources is planning a $75 million capital expenditure program for the com- ing year. Next year, Berea expects to report to the IRS earnings of $40 million after interest and taxes. The company presently has 20 million shares of common stock issued and outstanding. Dividend payments are expected to increase from the pres- ent level of $10 million to $12 million. The company expects its current asset needs to increase from a current level of $25 million to $30 million. Current liabilities, excluding short-term bank borrowings, are expected to increase from $15 million to $17 million. Interest payments are $5 million next year, and long-term debt retire- ment obligations are $8 million next year. Depreciation next year is expected to be $15 million on the company’s financial statements,but the company will report depreciation of $18 million for tax purposes. How much external financing is required by Berea for the coming year?

Reference no: EM131176560

Questions Cloud

Calculate the expected return for the portfolio : You have decided to invest $70,000 in Stock Fund, and $30,000 in Bond. The returns for each fund are forecasted below: Fill in the portfolio’s forecasted return for a strong economy and a weak economy. Then calculate the expected return for the portf..

Price of european call option on stock with strike price : The price of a European call option on a stock with a strike price of $50 is $6. The stock price is $51, the continuously compounded risk-free rate (all maturities) is 6% and the time to maturity is one year. The fair price of a one-year European put..

Analysis of past monthly movements in stock price produces : Analysis of past monthly movements in IBM's stock price produces the following estimates: α = 2.5% and β = 1.6. If the market index subsequently rises by 12% in one month and IBM's stock price increases by 20%, what is the abnormal change in IBM's st..

The current price of a non-dividend paying stock : The current price of a non-dividend paying stock is $30, Use a two-step tree to value a European call option on the stock with a strike price of $32 that expires in 6 months. Each step is 3 months, the risk free rate is 8% per annum with continuous c..

Capital expenditure program : Berea Resources is planning a $75 million capital expenditure program for the com- ing year. Next year, Berea expects to report to the IRS earnings of $40 million after interest and taxes. The company presently has 20 million shares of common stock i..

Different capital structures-equity plan and levered plan : Kyle Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Kyle would have 715,000 shares of stock outstanding. Under Plan II, there would be 465,000 shares of stock outstan..

Effects of the insolvency on company-shareholders : There has been a major global crisis, and your company’s board of directors has announced that the company is going bankrupt. No one could have seen this one coming. As your company’s controller, compose a summary report to your CEO advising him on t..

Calculate the annual return on the mutual funds : Suppose an individual invests $34,000 in a load mutual fund for two years. The load fee entails an up-front commission charge of 3.8 percent of the amount invested and is deducted from the original funds invested. In addition, annual fund operating e..

What is the indifference point between the two strategies : Sam’s Smokehouse wants to recapitalize and repurchase shares. The company currently has 900 shares (and no debt), but is thinking about borrowing $9,000 at 10% per year and buying back 150 of those shares. What is the indifference point between the t..

User Account

All Pages