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Asset level - firm needs to issue additional stock

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A firm has $25 million in assets and its optimal capital structure is 60% equity. If the firm has $18 million in retained earnings, at what asset level will the firm need to issue additional stock? (Assume no growth in retained earnings).

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Solution Summary

The solution explains how to calculate the asset level at which the firm will need to issue additional stock

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Answer: The firm can increase assets to $30 million.

The optimal capital structure has 60% equity, ...

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