Explore BrainMass

Explore BrainMass

    Company A: Calculate the size of a capital budget without having to issue new stock.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Company A has a capital structure that consists of 20% equity and 80% debt. The Company expects to report 3 million in net income this year and 60% of the net income will be paid out as dividends. How large must the firm's capital budget be this year without it having to issue any new common stock and why?

    1.2M?
    13M?
    1.5M?
    0.24M?
    or 6M?

    © BrainMass Inc. brainmass.com June 3, 2020, 4:48 pm ad1c9bdddf
    https://brainmass.com/business/capital-budgeting/calculate-size-capital-budget-issue-new-stock-4575

    Solution Preview

    The answer is 6M.

    Explanation:

    We know that earnings available to common ...

    Solution Summary

    In a logical step-by-step process, the solution calculates the answer to the capital budgeting amount. The steps include explanations.

    $2.19

    ADVERTISEMENT