Blue Co. already determined the additional financing needed that it plans to raise through issuance of shares amounting to P2,450,000. The profit of the firm is P1,800,000 and it has a policy of retaining two-third of its net income. How much is the projected capital budget of Blue Co.?

Blue Co. already determined the additional financing needed that it plans to raise through issuance of shares amounting to P2,450,000. The profit of the firm is P1,800,000 and it has a policy of retaining two-third of its net income. How much is the projected capital budget of Blue Co.?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A certain company must raise SR 220 million to fund its next project. 25% of the funds will come from a bank loan, which is charging 6.5%. 45% of the funds will come from issuing corporate bonds, at a rate of 4.5%. The remaining funds will be raised by selling preferred stock, with a promise of dividend payments of 7.8%. WACC:
A company roll out its capital budget for the coming year at P20,000,000. The optimal capital structure is 40% debt and 60% equity. Earnings before taxes and interest is P34.667 million. The company follows the residual dividend policy and maintains the same capital structure. The company has P200,000,000 assets. The average interest rate on outstanding debt is 10% and tax rate is 40%. How much is the total interest payment? Electric Co. recently completed a reverse split where 1,000,000 shares becomes 500,000 shares. Prior to the reverse split the stock price is P75. What is the price of each stock after the transaction?
Kielly Machines Inc. is planning an expansion program estimated to cost $100 million. Kielly is going to raise funds according to its target capital structure shown below. Debt 0.30 Preferred stock 0.24 Equity 0.46 Kielly had net income available to common shareholders of $184 million last year of which 75% was paid out in dividends. The company has a marginal tax rate of 40%. Additional data: The before-tax cost of debt is estimated to be 11%. The market yield of preferred stock is estimated to be 12%. The after-tax cost of common stock is estimated to be 16% What is Kielly's weighted average cost of capital? Select one: a. 14.00% b. 12.22% c. 13.54% d. 13.00%
Omani corporation is currently financed with 25% debt that could be borrowed at an interest rate of 10% and 75% equity. Management of a company is considering increasing its level of debt until 50% at the same interest to finance a new project with cost OMR (12) thousand. The new project will generate a cash flow that is mentioned in the below table. You are the financial manager of the company; hold other things are fixed, do you will recommend to increasing the level of debt up to 50% for the following aspects: - In the field of the level of cost of capital (WACC) and why? In the field of evaluating the new project, and why? Data is regarding the current position of the company Market risk premium of stock 4% Income Tax Rate 40% Risk-Free Rate of Return 6% Data is regarding the cash flow of project. Years 1 2 3 4 Cash Flow 2000 (1000) 6000 6000
Petersen Co. has a capital budget of $ 910 . The company wants to maintain a target capital structure that is 65 percent debt and remaining percent is equity. The company forecasts that its net income this year will be $ 809 . If the company follows a residual distribution policy (with all distributions in the form of cash dividends), what will be its payout ratio? Enter your answer to the nearest .1%. Enter your answer as a whole number, thus 25.1% would be 25.1 not .251. Do not use % signs in your answer. Your Answer: Answer
Kahn Inc. has a target capital structure of 60% common equity and 40% debt to fund its $11 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 15%, a before - tax cost of debt of 10%, and a tax rate of 25%. The company's retained earnings are adequate to provide the common equity portion of its capital budget. Its expected dividend next year (D1) is $4, and the current stock price is $30. What is the company's expected growth rate? Do not round intermediate calculations. Round your answer to two decimal places. If the firm's net income is expected to be $1.4 billion, what portion of its net income is the firm expected to pay out as dividends? Do not round intermediate calculations. Round your answer to two decimal places. (Hint: Refer to Equation below.) Growth rate = (1 - Payout ratio) ROE
Kahn Inc. has a target capital structure of 45% common equity and 55% debt to fund its $10 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 12%, a before-tax cost of debt of 9%, and a tax rate of 25%. The company's retained earnings are adequate to provide the common equity portion of its capital budget. Its expected dividend next year (D1) is $3, and the current stock price is $33. What is the company's expected growth rate? Do not round intermediate calculations. Round your answer to two decimal places. % If the firm's net income is expected to be $1.9 billion, what portion of its net income is the firm expected to pay out as dividends? Do not round intermediate calculations. Round your answer to two decimal places. (Hint: Refer to Equation below.) Growth rate = (1 - Payout ratio)ROE %
e. Kecewa Berhad is planning a RM50,000 expansion. The expansion is to be financed by RM20,000 debt and RM30,000 common stock. The before-tax cost of debt is 9% and the cost of common stock is 14%. If the corporate tax is 40%. Determine the Weighted Average Cost of Capital (WACC) for Kecewa Berhad.
Kahn Inc. has a target capital structure of 40% common equity and 60% debt to fund its $8 billion in operating assets. Furthermore, Kahn Inc. has a WACC of 13%, a before-tax cost of debt of 11%, and a tax rate of 25%. The company's retained earnings are adequate to provide the common equity portion of its capital budget. Its expected dividend next year (D1) is $2, and the current stock price is $26. a. What is the company's expected growth rate? Do not round intermediate calculations. Round your answer to two decimal places. % b. If the firm's net income is expected to be $1.6 billion, what portion of its net income is the firm expected to pay out as dividends? Do not round intermediate calculations. Round your answer to two decimal places. (Hint: Refer to Equation below.) Growth rate (1-Payout ratio)ROE %

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