Company capital budget for next year

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Kendra Brown is analyzing the capital requirements for Reynolds Corporation for next year. Kendra forecasts that Reynolds will need $8,830,600 to fund all of its positive-NPV projects, and her job is to determine how to raise the money. Reynolds's net income is $6,590,000, and it has paid a $1.590 dividend per share (DPS) for the past several years (4,070,000 shares of common stock are outstanding); its shareholders expect the dividend to remain constant for the next several years. The company's target capital structure is 33.0% debt and 67.0% equity. Consider the case in which Reynolds's management wants to maintain the $1.590 DPS and its target capital structure but also wants to avoid issuing new common stock. The company is willing to cut its capital budget in order to meet its other objectives. Assuming the company's projects are divisible, what will be the company's capital budget for the next year?

Reference no: EM132693273

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