Owen\'s enterprises is in the process of determining its capital budget for the
ID: 2389380 • Letter: O
Question
Owen's enterprises is in the process of determining its capital budget for the next fiscal year. The firms current capital structure, which it considers to be optimal, is contained in the following balance sheet.Balance Sheet
Current Assets $40,000,000 Accounts Payable $20,000,000
Fixed Assets 400,000,000 Other Current Liabilities 10,000,000
Total Assets $440,000,000 Long term debt 123,000,000
Common Stock at par 15,500,000.00
Paid in capital in excess of par 51,000,000
Retained earnings 220,500,000
Total Liabilities and
Stockholders equity 440,000,000
The following information has been obtained from conversations with financial officers, and the firms investment
banker and lead bank
Explanation / Answer
Break point
Weighted marginal cost of capital
60,000,000
13.19
60,000,000
13.55
Additional funds
14.29
Break point
Weighted marginal cost of capital
60,000,000
13.19
60,000,000
13.55
Additional funds
14.29
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