1.) A company expects to earn $23 million in income this coming year. Its target

Question

1.) A company expects to earn $23 million in income this coming year. Its target capital structure is 30% debt, 15% preferred stock, and 55% common equity financing. The company normally pays a dividend equal to 27% of its earnings. At what point will its WACC move from one level to the next, based upon the need to issue new common shares, assuming it adheres to its target capital structure? At what total capital investment level? Show your answer in millions of dollars with one decimal point ($34,000,000 you would record as 34.0)

2.) The formula Do(1+g)/{P(1-f)} + g can be used to estimate the required return to the issuing company on which security?

a.Perferred stock

b.common stock

c.Retained earnings

d.All the above

Explanation / Answer

Answer

Note : Some information may be missing in question 1.

Answer 2.)

The formula Do(1+g)/{P(1-f)} + g can be used to estimate the required return to the issuing company on which security?

Answer :   d.All the above

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