Fundamentals of Financial Management, Concise Edition (MindTap Course List)
9th Edition
ISBN: 9781305635937
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Chapter 14, Problem 5P
Summary Introduction
To calculate: Amount of external equity CC seeks at the beginning to expand its capacity as desire.
Introduction:
External Equity Financing:
When a firm requires funds and it obtains them externally then this will be termed as external equity financing. It is also termed as selling of ownership interest to acquire funds for business.
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External Equity Financing
Gardial GreenLights, a manufacturer of
energy-efficient lighting solutions, has
had such success with its new products
that it is planning to substantially
expand its manufacturing capacity with
a $15 million investment in new
machinery. Gardial plans to maintain its
current 25% debt-to-total-assets ratio
for its capital structure and to maintain
its dividend policy in which at the end of
each year it distributes 35% of the
year's net income. This year's net
income was $8 million. How much
external equity must Gardial seek now
to expand as planned? Enter your
answer in millions. For example, an
answer of $1.23 million should be
entered as 1.23, not 1,230,000. Round
your answer to two decimal places.
million
LA
External Equity Financing
Gardial GreenLights, a manufacturer of energy-efficient lighting solutions, has had such success with its new products that it is planning to substantially expand its manufacturing capacity with a
$20 million investment in new machinery. Gardial plans to maintain its current 60% debt-to-total-assets ratio for its capital structure and to maintain its dividend policy in which at the end of each
year it distributes 40% of the year's net income. This year's net income was $8 million. How much external equity must Gardial seek now to expand as planned? Enter your answer in millions. For
example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Round your answer to two decimal places.
$
million
please be accurate
Chapter 14 Solutions
Fundamentals of Financial Management, Concise Edition (MindTap Course List)
Ch. 14 - Prob. 1QCh. 14 - The cost of retained earnings is less than the...Ch. 14 - Would it ever be rational for a firm to borrow...Ch. 14 - Modigliani and Miller (MM), on the one hand, and...Ch. 14 - How would each of the following changes tend to...Ch. 14 - One position expressed in the financial literature...Ch. 14 - Prob. 7QCh. 14 - What is the difference between a stock dividend...Ch. 14 - Most firms like to have their stock selling at a...Ch. 14 - Indicate whether the following statements are true...
Ch. 14 - Prob. 11QCh. 14 - RESIDUAL DIVIDEND MODEL Altamonte...Ch. 14 - Prob. 2PCh. 14 - STOCK REPURCHASES Gamma Industries has net income...Ch. 14 - STOCK SPLIT After a 5-for-1 stock split, Tyler...Ch. 14 - Prob. 5PCh. 14 - RESIDUAL DIVIDEND MODEL Walsh Company is...Ch. 14 - DIVIDENDS Brooks sporting Inc. is prepared to...Ch. 14 - Prob. 8PCh. 14 - ALTERNATIVE DIVIDEND POLICIES In 2015, Keenan...Ch. 14 - RESIDUAL DIVIDEND MODEL Buena Terra Corporation is...Ch. 14 - DIVIDEND POLICY Southeastern Steel Company (SSC)...Ch. 14 - Prob. 1DQCh. 14 - Prob. 2DQCh. 14 - Prob. 3DQCh. 14 - Prob. 4DQCh. 14 - Prob. 5DQCh. 14 - Prob. 6DQ
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