How much can the firm spend on new capital? expenditures

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Problem: Parker Prints is in negotiation with two of its largest customers to increase the? firm's sales dramatically. The increase will require that Parker expand its production facilities at a cost of $25 million. Parker expects to pay out $7 million in dividends to its shareholders next year. Parker maintains a 20 percent debt ratio in its capital structure.

Required:

Question 1: If Parker earns $14 million next? year, how much common stock will the firm need to sell in order to maintain its target capital? structure?

Question 2: If Parker wants to avoid selling any new? stock, how much can the firm spend on new capital? expenditures?

Reference no: EM132459196

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