896,000,000 Total capital $1,690,000,000 Cost of Debt (kd) = 11% for amounts up to 80 M of additional Debt; will rise to 13% after that. Cost of Preferred = 10.5% at any amount
YZ Goods target capital structure and other data follow:
Long-term debt $ 754,000,000
Common equity 896,000,000
Total capital $1,690,000,000
Cost of Debt (kd) = 11% for amounts up to 80 M of additional Debt; will rise to 13% after that.
Cost of Preferred = 10.5% at any amount
T = 40%.
P0 = $23.
g= 8%, and it is expected to remain constant.
Assume that the company expects to have total earnings of $137.8 million in 2020. Further, it has a target payout ratio of 45 percent, so it plans to pay out 45 percent of its earnings as dividends. Flotation cost of 5% is incurred for issuance of new shares.
The following projects are available for investment:
Project Cost (in Millions)
A $50 13.0%
B 50 12.5
C 80 12.0
D 80 10.2
A. What is the
B. What is the Bonds breakpoint?
C. What is the MCC at 100M financing budget
D. What is the optimum capital budget for XYZ in 2020?
answer a b and c
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