Raise the money by selling new bonds

Assignment Help Financial Management

Reference no: EM131187988

Caughlin Company needs to raise $50 million to start a new project and will raise the money by selling new bonds. The company will generate no internal equity for the foreseeable future. The company has a target capital structure of 60 percent common stock, 10 percent preferred stock, and 30 percent debt. Flotation costs for issuing new common stock are 10 percent, for new preferred stock, 7 percent, and for new debt, 4 percent.

Reference no: EM131187988

Questions Cloud

Studied financial ratios and other quantitative measures : Throughout this course we have studied financial ratios and other quantitative measures. In at least three well composed paragraphs, select what financial ratios or measures you believe are most useful in identifying business risks. What would you lo..

Calculate times-interest-earned ratio : As the chief finacial officer of Cascade Designs, Calculate Cascade's times-interest-earned ratio for next year assuming the firm raises $70 million of new debt at an interest rate of 6%. Calculate Cascade's time-burden-covered ratio for next year as..

People may lack capacity to enter into contracts : People may lack capacity to enter into contracts. For instance, most contracts with minors are voidable. Other causes for lack of capacity are mental illness, drugged state, and drunkenness. Do you think all of these should be treated the same? Why o..

What would be the effective cost of that credit : DD Cost of Trade Credit and Bank Loan Lancaster Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 30; and it currently pays on the 5th day and takes discounts. Lancaster plans to expand, which will require additional financi..

Raise the money by selling new bonds : Caughlin Company needs to raise $50 million to start a new project and will raise the money by selling new bonds. The company will generate no internal equity for the foreseeable future. The company has a target capital structure of 60 percent common..

What important factors-addition to quantitative factors : What important factors, in addition to quantitative factors, should a firm consider when it is making a capital structure decision? How do these factors play in the decision? Be sure to support your ideas with examples from your own experience or oth..

Annual interest tax shield-through with debt insurence : In recent years, Haverhill Corperation has averaged a net income of $10 million per year on net sales of $100 million per year. It currently has no-long term debt, but is considering a debt issue of $5 million. The interest rate on the debt woyuld be..

What is the market value of the firm prior to the recap : An all-equity business has 100 million shares outstanding selling for $20 a share. Managment bhelieves that interest rates are unreasonably low and decide to execute a leverage recapitalization. What is the market value of the firm prior to the recap..

Calculate time-interest-earned-times-burden-covered ratio : As the chief financial officer of Cascade Designs, Calculate Cascade's time-interest-earned ratio for next year assuming the firm raises $70 million in new debt at an interest rate of 6%. Calculate Cascade's times-burden-covered ratio for next year a..

User Account

All Pages