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Chapter 14, Problem 5P
Summary Introduction

To calculate: Amount of external equity NP seeks at the beginning to expand its capacity as desire.

External Equity Financing:

When a firm requires funds and it obtains them externally, then it is 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 $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
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