Northern Pacific's External Equity
Not what you're looking for?
Northern Pacific Heating and Cooling Inc. has a 6-month backlog of orders for its patented solar heating system. To meet this demand, management plans to expand production capacity by 40 percent with a $10 million investment in plant and machinery. The firm wants to maintain a 40 percent debt-to-total-assets ratio in its capital structure; it also wants to maintain its past dividend policy of distributing 45 percent of last year's net income. In 2004, net income was $5 million. How much external equity must Northern Pacific seek at the beginning of 2005 to expand capacity as desired?
Purchase this Solution
Solution Summary
The external equity required for expanding capacity is calculated in an attached Excel document.
Solution Preview
Capital budget= $10 million
Requirement to be met from:
Optimal capital structure
60% equity= $6 million
40% debt= $4 ...
Purchase this Solution
Free BrainMass Quizzes
Operations Management
This quiz tests a student's knowledge about Operations Management
Change and Resistance within Organizations
This quiz intended to help students understand change and resistance in organizations
Team Development Strategies
This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.
Employee Orientation
Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.
Managing the Older Worker
This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce