If Wolves Entertainment Company is acting in the best interests of stockholders (following the primary goal of the firm), which of the following is the optimal (best) capital budget for the firm? Debt = 50%, Equity = 50%, EPS = $3.05, Stock price = $22.90, Cost of Debt = 3.5%, Capital Budget $ 10 Million Debt = 80%, Equity = 20%, EPS = $3.28, Stock price = $19.70, Cost of Debt = 5.8%,, Capital Budget $ 16 Million Debt = 60%, Equity = 40%, EPS = $3.18, Stock price = $21.20, Cost of Debt = 4.0%, Capital Budget $ 12 Million Debt = 70%, Equity = 30%, EPS = $3.42, Stock price = $20.40, Cost of Debt = 5.0%,, Capital Budget $ 14 Million Debt 40%, Equity = 60%, EPS = $2.95, Stock price = $16.50, Cost of Debt = 3.0%, Capital Budget $8 Million
If Wolves Entertainment Company is acting in the best interests of stockholders (following the primary goal of the firm), which of the following is the optimal (best) capital budget for the firm? Debt = 50%, Equity = 50%, EPS = $3.05, Stock price = $22.90, Cost of Debt = 3.5%, Capital Budget $ 10 Million Debt = 80%, Equity = 20%, EPS = $3.28, Stock price = $19.70, Cost of Debt = 5.8%,, Capital Budget $ 16 Million Debt = 60%, Equity = 40%, EPS = $3.18, Stock price = $21.20, Cost of Debt = 4.0%, Capital Budget $ 12 Million Debt = 70%, Equity = 30%, EPS = $3.42, Stock price = $20.40, Cost of Debt = 5.0%,, Capital Budget $ 14 Million Debt 40%, Equity = 60%, EPS = $2.95, Stock price = $16.50, Cost of Debt = 3.0%, Capital Budget $8 Million
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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Transcribed Image Text:If Wolves Entertainment Company is acting in the best interests of stockholders
(following the primary goal of the firm), which of the following is the optimal (best)
capital budget for the firm?
Debt = 50%, Equity = 50%, EPS = $3.05, Stock price = $22.90, Cost of Debt =
3.5%, Capital Budget $ 10 Million
Debt = 80%, Equity = 20%, EPS = $3.28, Stock price = $19.70, Cost of Debt =
5.8%,, Capital Budget $ 16 Million
Debt 60%, Equity = 40%, EPS = $3.18, Stock price= $21.20, Cost of Debt =
4.0%, Capital Budget $ 12 Million
=
Debt 70%, Equity = 30%, EPS = $3.42, Stock price = $20.40, Cost of Debt =
5.0%,, Capital Budget $ 14 Million
=
Debt 40%, Equity= 60%, EPS = $2.95, Stock price $16.50, Cost of Debt =
3.0%, Capital Budget $8 Million
-
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