EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 12, Problem 13P
Summary Introduction
To determine: The marginal cost of capital schedule.
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A firm expects to have net income of $5,000,000 during the next year. The company’s target capital structure is 60% debt and 40% equity. The company's director of capital budgeting has determined that the optimal capital budget for the coming year is $5,000,000. If MSL Tech follows a residual distribution policy (with all distributions in the form of dividends) to determine the coming year’s dividend, then what is the firm’s expected dividend payments?
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Using the data from Question 31, find the dividend payout ratio for the company.
20%
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60%
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The CEO of Harlem Hardware Supplies has submitted together a capital budget of $48,500,000 for the following year’s investment opportunities. He expects to have $19,000,000 in retained earnings at the end of the year. Harlem’s target capital structure calls for 45 percent equity. Based on these figures, will Harlem be able to meet their capital budget needs with retained earnings?
Use these data to calculate Harlem's retained earnings break point (REBP). Calculate the figure to the nearest dollar
Berea Resources is planning a $75 million capital expenditure program for the coming year. Next year, Berea expects to report to the IRS earnings of $35 million after interest and taxes. The company presently has 24 million shares of common stock issued and outstanding. Dividend payments are expected to increase from the present level of $14 million to $15 million. The company expects its current asset needs to increase from a current level of $26 million to $29 million. Current liabilities, excluding short-term bank borrowings, are expected to increase from $17 million to $19 million. Interest payments are $5 million next year, and long-term debt retirement obligations are $7 million next year. Depreciation next year is expected to be $11 million on the company’s financial statements, but the company will report depreciation of $14 million for tax purposes.
How much external financing is required by Berea for the coming year? Enter your answer in millions. For example, an answer of $1…
Chapter 12 Solutions
EBK CONTEMPORARY FINANCIAL MANAGEMENT
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