How much debt will chrysler have? Suppose Chrysler Motors has 720million shares outstanding with ashare price of $68.25, and $30billion in debt. If in three years,Chrysler has 750 million sharesoutstanding trading for $76 pershare, how much debt will Chryslerhave if it maintains a constantdebt-equity ratio?Answer: $34.77 billion or 34.80 billion

Solution Approach:The debt-equity ratio is given by:Debt-Equity Ratio=Debt/Equity Step 1: Calculate…

Answered: Suppose Chrysler Motors has 720 million…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 15P

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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 Caterpillar, Inc., has 671 million shares outstanding with a share price of $72.97, and $25.71 billion in debt. If in three years, Caterpillar has 700 million shares outstanding trading for $83.96 per share, how much debt will Caterpillar have if it maintains a constant debt-equity ratio? Question content area bottom Part 1 The amount of debt required in three years will be $enter your response here billion. (
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Constant debt equity ratio?
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Constant debt equity ratio? General accounting
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Time Warner shares have market capitalization of $55 billion. The company just paid a dividend of $0.30 per share and each share trades for $45. The growth rate in dividends is expected to be 7% per year. Also, Time Warner has $15 billion of debt that trades with a yield to maturity of 9%. If the firms tax rate is 40%, compute the WACC? A. 7.22% B. 8.3% C. 7.94% D. 6.86%
Suppose that Papa Bell, Inc.’s equity is currently selling for $50 per share, with 3.5 million shares outstanding. Assume the firm also has 12,000 bonds outstanding, and they are selling at 94 percent of par.What are the firm’s current capital structure weights? Capital Structure Weights Equity % Debt %

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