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How much external financing is needed

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Reference no: EM132406527

To increase production capacity by 25%, a $500,000 investment is required. The firm wants to maintain a 20% debt-to-asset ratio, and continue to pay 40% of income as dividends. Net Income was $200,000.

A. How much External Financing is needed?

B. How much new Debt must they Issue?

New debt required = (New investment)(Debt ratio)

C. How much new equity should they issue?

Reference no: EM132406527

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