Purchase Solution

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

Not what you're looking for?

Ask Custom Question

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?

Purchase this Solution
Solution Summary

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

Solution Preview

The answer is 6M.

Explanation:

We know that earnings available to common ...

Purchase this Solution
Free BrainMass Quizzes
MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Lean your Process

This quiz will help you understand the basic concepts of Lean.

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

View More Free Quizzes
Related BrainMass Solutions

  • Residual Dvidend Model

    d) Can the company maintain its current capital structure, maintain the $3.00 DPS, and maintain a $10 million capital budget without having to raise new common stock?

  • Risk Adjusted Required Rate of Return, Capital Budgets and Common Stock.

    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 can the firm's capital budget be this year without it having to issue any new common stock?

  • Buena Terra Corporation - Residual Distribution Model

    D- Can the company maintain its current capital structure, maintain the #3.00 DPS, and maintain a $10 millions capital budget without having to raise new common stock?

  • 14-10 Buena Terra, 13-2 Capital Structure & Dividend Policy

    Can the company maintain its current capital structure, maintain the $3.00 DPS, and maintain a $10 million capital budget without having to raise new common stock? e.

  • Detailed Explanation to Residual Dividend Policy

    Can the company maintain its current capital structure, maintain the $3.00 DPS, and maintain a $10 million capital budget without having to raise new common stock? e.

  • Distributions to Shareholders: Dividends and Share Repurchases

    Can the company maintain its current capital structure, maintain the $3.00 DPS, and maintain a $10 million capital budget without having to raise new common stock? e.

  • Capital Budget

    Calculate the after-tax cost of each component source of capital. 2. Calculate the marginal cost of capital for the various internals, or "packages," of capital the company can raise next year. 3.

  • Cost of Capital: The Marietta Corporation

    Calculate the after-tax cost of each component source of capital. 2. Calculate the marginal cost of capital for the various intervals, or "packages," of capital the company can raise next year. Plot the marginal cost of capital curve. 3.

  • Residual Dividend Policy

    What is the main disadvantage of having a residual dividend policy? d. Are high dividends always preferred to low dividends? Explain.

View More Related Solutions