Bingo Inc. has a asset of 400,000 in total where it comprises of equity 70% and debt of 30% (12%) interest. The company was planning to do some investment and it anticipates the increase of current income from 40,000 to 60,000. Two options available to resource finance namely, A. Share issue of 1,000 at rate of 100. B. Bond selling of 100,000 with rate of interest 12.5%. There is no preferred stock in the structure of capital. Required: A.Optimal capital structure B.Degree of Financial Leverage at 50% rate of tax
Bingo Inc. has a asset of 400,000 in total where it comprises of equity 70% and debt of 30% (12%) interest. The company was planning to do some investment and it anticipates the increase of current income from 40,000 to 60,000. Two options available to resource finance namely, A. Share issue of 1,000 at rate of 100. B. Bond selling of 100,000 with rate of interest 12.5%. There is no preferred stock in the structure of capital. Required: A.Optimal capital structure B.Degree of Financial Leverage at 50% rate of tax
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Bingo Inc. has a asset of 400,000 in total where it comprises of equity 70% and debt of 30% (12%) interest. The company was planning to do some investment and it anticipates the increase of current income from 40,000 to 60,000.
Two options available to resource finance namely,
A. Share issue of 1,000 at rate of 100.
B. Bond selling of 100,000 with rate of interest 12.5%.
There is no
Required:
A.Optimal capital structure
B.Degree of Financial Leverage at 50% rate of tax
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