Tapley incs current target capital structure has a target

Assignment Help Finance Basics

Reference no: EM13620416

Tapley Inc.'s current (target) capital structure has a target debt ratio (D/TA) of 60 percent. The firm can raise up to $5 million in new debt at a before-tax cost of 8 percent. If more debt is required, the initial cost will be 8.5 percent, and if more than $10 million of debt is required, the cost will be 9 percent. Net income for the previous year was $10 million, and it is expected to increase by 10 percent this year. The firm expects to maintain its dividend payout ratio of 40 percent on the 1 million shares of common stock outstanding. If it must sell new common stock, it would encounter a 10 percent flotation cost on the first $2 million, a 15 percent cost if more than $2 million but less than $4 million is needed, and a 20 percent cost if more than $4 million of new outside equity is required. Tapley's tax rate is 30 percent, and its current stock price is $88 per share. If the firm has an unlimited number of projects which will earn a 10.25 percent return, what is the maximum capital budget that can be adopted without adversely affecting stockholder wealth?

Reference no: EM13620416

Questions Cloud

Two identical capacitors are connected in parallel to an : two identical capacitors are connected in parallel to an ac generator that has a frequency of 650 hz and produces a

Mr davidson should prepare his 2013 tax filings in early : mr. davidson plans to buy a new house in october 2013. the sale price of the house is 436000. he plans to pay 20 down

A bond matures in 2020 and has an annual coupon of 365 : a bond matures in 2020 and has an annual coupon of 3.65 percent payable on january 1 and july 1. the current price of

Define mach number and determine the type of speed an : define mach number and determine the type of speed an aircraft is flying if the aircraft speed is 880 mph at an

Tapley incs current target capital structure has a target : tapley inc.s current target capital structure has a target debt ratio dta of 60 percent. the firm can raise up to 5

A find the power lost in heating the wires if the power is : a generating station is producing 1.7 x 106 w of power that is to be sent to a small town located 4.2 km away. each of

Nbspthe primary coil is plugged into a standard 120-v : the secondary coil of a step-up transformer provides the voltage that operates an electrostatic air filter. the turns

Find the emf induced in the toroid when the current : a long solenoid cross-sectional area 1.4 x 10-6 m2 number of turns per unit length 2102 turnsm is bent into a

If the company plans to pay a dividend of 385 next year : the stock price of webber co. is 68. investors require an 11 percent rate of return on similar stocks.requiredif the

User Account

All Pages