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What percentage of the capital budget must be financed

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Problem 1: Warren Supply Inc. is evaluating its capital budget. The company finances with debt and common equity, but because of market conditions, wants to avoid issuing any new common stock during the coming year. It is forecasting an EPS of $3.00 for the coming year on its 500,000 outstanding shares of stock. Its capital budget is forecasted at $975,000, and it is committed to maintaining a $2.00 dividend per share. Given these constraints, what percentage of the capital budget must be financed with debt?

a. 46.2%
b. 47.9%
c. 48.7%
d. 47.1%
e. 45.4%

Reference no: EM132985152

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