Common stock and percentage of debt fund

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Reference no: EM1310795

Debt, common stock and percentage of debt fund.

Allensworth Motors forecasts that its earnings per share will be $3.00 this year. The company has 500 million shares of stock outstanding. Allensworth estimates that its capital budget for the upcoming year will be $800 million, and it is committed to funding the entire capital budget. The company is also committed to maintaining its dividend of $2.00 per share, and it wants to avoid issuing new common stock. The company's capital structure consists of debt and common stock. Given the above constraints, what portion of the $800 million capital budget will be funded with debt?

a.53.13%
b.46.02%
c.40.00%
d.6.25%
e.37.50%

Reference no: EM1310795

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