Purchase Solution

Retained Earnings Breakpoint

Not what you're looking for?

Ask Custom Question

Given the following information,

[TABLE]

Calculate:

A. Retained Earnings Breakpoint: ________________________

B. Assume the firm goes to raise $250 Mil, what is the weighted average cost of capital: _____________________

C. Assume the firm goes to raise $500 Mil, what is the weighted average cost of capital: _____________________

Attachments
Purchase this Solution
Solution Summary

This solution response provides the steps to compute the retained earnings breakpoint in the given business math problem.

Solution Preview

** Please see the attached file for the complete solution response **

Calculate:

A. Retained Earnings Breakpoint: ________________________

BreakPoint= Retained earnings/Weights of equity
=125/0.32
$390.63 mn

B. Assume the firm goes to raise $250 ...

Purchase this Solution
Free BrainMass Quizzes
Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

View More Free Quizzes
Related BrainMass Solutions

  • EPS Growth Rate

    Calculate the breakpoint associated with retained earnings. Breakpoint = Retained earnings/Equity fraction = [15,000,000(1 - 0.30)]/0.60 = 17,500,000 d.

  • EPS - Excel

    Calculate the breakpoint associated with retained earnings.

  • Breakpoint on the MCC where new stock will have to be issued

    . $8.0 million Total net earnings = 4.0 millions Dividend = 40%*4.0=1.6 million Retained earnings = 2.4 million Equity / total capital = 0.5 MCC = 2.4 /0.5 = 4.8 million Answer is D. The solution calculates the breakpoint.

  • Finance: Weighted average cost of capital

    The breakpoint is the point at which any additional increase, in capital funding, will increase the weighted average cost of capital. From the question, you will observe that the company will rely on its retained earnings for initial funds.

  • Optimal capital budget

    Cost of retained earnings Using the Dividend discount model Cost of retained earnings = D1/P0 + g D1 = expected dividend = 1.00 X 1.06 = $1.06 P0 = current price = $12.50 g = growth rate = 6% Cost of retained earnings = 1.06/12.5 + 6% = 14.48%

  • Marginal cost of capital schedule

    The remaining equity is 4.2 million (retained earnings 46.2-42). This can give us a total capital of 6 million (4.2/0.7).

  • Corporate Finance and Horizon Company

    The overall cost of financing for the firm is called the A. 0 weighted average cost of capita B. 0 cost of preferred stock C. 0 retained earnings breakpoint D. 0 None of the above 19.

  • Finest Products, Inc- WACC

    Calculate FPI's WACC above the breakpoint.

  • Operational Amplifier Stability and Compensation

    The solution estimates the frequency at which the breakpoint of the compensated response must occur.

View More Related Solutions