Value of equity = New investments / (1 + debt/equity
ratio)
= $1,050,000 / (1 + 0.75)
= $600,000
Amount of dividend = Earnings - equity
= $850,000 - $600,000
= $250,000
Dividend amount = $250,000
Lucky Mike's, Inc. has a target debt/equity ratio of 0.75. The earnings at the 2015 year-end...
A firm maintains a capital structure with debt-equity ratio of 2/3 and has $24,000 earnings for the year-end. The firm follows a residual dividend policy. a. What is the maximum capital budget amount the firm can finance without raising external equity? b. Suppose the firm's capital structure before financing the maximum capital budget consisted of $500,000 debt and $750,000 equity. Calculate the firm's debt ratio after financing the maximum capital budget in part (a).
A firm maintains a capital structure with debt-equity ratio of 2/3 and has $24,000 earnings for the year-end. The firm follows a residual dividend policy. a. What is the maximum capital budget amount the firm can finance without raising external equity? b. Suppose the firm's capital structure before financing the maximum capital budget consisted of $500,000 debt and $750,000 equity. Calculate the firm's debt ratio after financing the maximum capital budget in part (a).
McCann Publishing has a target capital structure of 35% debt and 65% equity. This year's capital budget is $850,000 and it wants to pay a dividend of $400,000. If the company follows a residual dividend policy, how much net income must it earn to meet its capital budgeting requirements and pay the dividend, all while keeping its capital structure in balance? A) $297,500 B) $552,500 C) $697,500 D) $952,500 E) $1,250,000
Ibaka Inventions has a debt-equity ratio of 4. Earnings for next year are estimated at $60,000. Capital spending is estimated at $200,000 for next year. If the company follows a fixed dividend policy, with payout of 30%, what is the estimated total dividend ?
Altamonte Telecommunications has a target capital structure that consists of 50% debt and 50% equity. The company anticipates that its capital budget for the upcoming year will be $3,000,000. If Altamonte reports net income of $1,600,000 and it follows a residual dividend payout policy, what will be its dividend payout ratio? Round your answer to two decimal places. %
Altamonte Telecommunications 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 $1,000,000. If Altamonte reports net income of $2,500,000 and it follows a residual dividend payout policy, what will be its dividend payout ratio? Round your answer to two decimal places. %
Starset, Inc., has a target debt-equity ratio of 0.71. Its WACC is 10.5 percent, and the tax rate is 33 percent. If the company's cost of equity is 16.5 percent, what is the pretax cost of debt? If instead you know that the aftertax cost of debt is 6 percent, what is the cost of equity?
Kose, Inc., has a target debt-equity ratio of 1.31. Its WACC is 8.1 percent, and the tax rate is 22%. a. If the company's cost of equity is 12%, what is its pretax cost of debt? b. If instead you know that the after-tax cost of debt is 5.8%, what is the cost of equity?
Starset, Inc., has a target debt-equity ratio of 0.77. Its WACC is 11 percent, and the tax rate is 32 percent. a. If the company's cost of equity is 16.5 percent, what is the pretax cost of debt? b. If instead you know that the aftertax cost of debt is 6.6 percent, what is the cost of equity?
Kose, Inc., has a target debt-equity ratio of .57. Its WACC is 10.4 percent, and the tax rate is 25 percent. a. If the company’s cost of equity is 15 percent, what is its pretax cost of debt? b. If instead you know that the aftertax cost of debt is 4.6 percent, what is the cost of equity?