Clanton Company is financed 75 percent by equity and 25 percent by debt. If the firm expects to earn $30 million in net income next year and retain 40% of it, how large can the capital budget be before common stock must be sold? a. $7.5 million b. $12 million c. $15.5 million d. $16 million
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- Ogier Incorporated currently has $800 million in sales, which are projected to grow by 10% in Year 1 and by 5% in Year 2. Its operating profitability ratio (OP) is 10%, and its capital requirement ratio (CR) is 80%? What are the projected sales in Years 1 and 2? What are the projected amounts of net operating profit after taxes (NOPAT) for Years 1 and 2? What are the projected amounts of total net operating capital (OpCap) for Years 1 and 2? What is the projected FCF for Year 2?Assume that IWT has completed its IPO and has a $112.5 million capital budget planned for the coming year. You have determined that its present capital structure (80% equity and 20% debt) is optimal, and its net income is forecasted at $140 million. Use the residual distribution approach to determine IWT’s total dollar distribution. Assume for now that the distribution is in the form of a dividend. Suppose IWT has 100 million shares of stock outstanding. What is the forecasted dividend payout ratio? What is the forecasted dividend per share? What would happen to the payout ratio and DPS if net income were forecasted to decrease to $90 million? To increase to $160 million? In general terms, how would a change in investment opportunities affect the payout ratio under the residual distribution policy? What are the advantages and disadvantages of the residual policy? (Hint: Don’t neglect signaling and clientele effects.)Suppose Firm A plans to retain $100 million of earnings for the year. It wants tofinance its capital budget using a target capital structure of 46% debt, 3% preferred,and 51% common equity. How large could its capital budget be before it must issuenew common stock?
- Clanton Company is financed 40 percent by common equity and 60 percent by debt. If the firm expects to earn $20 million in net income next year and retain 40% of it, how large can the capital budget be before new common stock must be sold? a) $8.0 million b) $12.0 million c) $20.0 million d) $50.0 millionMortal Inc. expects to have a capital budget of $575,000 next year. The company wants to maintain a target capital structure with 35% debt and 65% equity, and its forecasted net income is $500,000. If the company follows the residual dividend model, how much in dividends, if any, will it pay? a. $111,100 b. $126,250 c. $132,563 d. $118,675 e. $113,625 Portland Plastics Inc. has the following data. If it follows the residual dividend model, what is its forecasted dividend payout ratio? Capital budget $13,500 % Debt 40% Net income (NI) $13,650 a. 42.29% b. 44.73% c. 49.20% d. 40.66% e. 32.53%Avant-Marlowe Technologies has a target capital structure that consists of 40% debt and 60% equity. The company anticipates that its capital budget for the upcoming year will be $30 million. If the firm reports net income of $20 million, and it follows a residual dividend policy, what will be its dividend payout ratio? Select one: a..67 b. .10 c. .42 d. .80 e..40
- Assume that B Corp. net income for next year would be 500 million and its optimal capital budget for next year is 250 million. Also assume that the debt ratio is now 80%. What would be the maximum capital spending if B Corp decides to retain all of its earnings? A) $250 m B) $2,500m C) $4,500 m D) $450 E) $5.500 m OA OB OC OD OE1. Dentaltech Inc. projects the following data for the coming year. If the firm follows the residual dividend model and also maintains its target capital structure, what will its dividend payout ratio be? $2,600,000 Capital budget 10% % Debt $5,500,000 % Equity 5,000,000 Tax rate EBIT $875,000 40% Interest rate Debt outstanding Shares outstanding 60% 40% a. 60.8% b. 57.3% c. 52.2% d. 45.3% e. 71.6%Broske industries... Financial accounting
- The target capital structure consists of... Please solve this financial accounting question1. Quantitative Problem: Barton Industries expects that its target capital structure for raising funds in the future for its capital budget will consist of 40% debt, 5% preferred stock, and 55% common equity. Note that the firm's marginal tax rate is 25%. Assume that the firm's cost of debt, rd, is 9.2%, the firm's cost of preferred stock, rp, is 8.4% and the firm's cost of equity is 11.8% for old equity, rs, and 12.2% for new equity, re. What is the firm's weighted average cost of capital (WACC1) if it uses retained earnings as its source of common equity? Do not round intermediate calculations. Round your answer to two decimal places. 2. What is the firm’s weighted average cost of capital (WACC2) if it has to issue new common stock? Do not round intermediate calculations. Round your answer to two decimal placesThe capital budget forecast for the Santano Company is $725,000. The CFO wants to maintain a target capital structure of 45% debt and 55% equity, and it also wants to pay dividends of $500,000. If the company follows the residual dividend policy, how much income must it earn, and what will its dividend payout ratio be?Net IncomePayout a. $ 943,68858.41% b. $1,092,43667.62% c. $ 990,87261.34% d. $ 898,75055.63% e. $1,040,41564.40%