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This is for Accounting

I'm not taking Accounting now. But i will be taking it in Fall. This is just for my presonal learning

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Financial Management:
<br>Questions.
<br>
<br>1. In order to maintain the present capital structure, how much of the new capital must be financed by equity (common & retained earnings).
<br>First we find out the total funding need.
<br>Additional funding required is \$20 million.
<br>Secondly, as the current capital structure is optimal, we only have to replicate it. So, we find what percentage of the current capital structure is equity (common & retained earning). This is (30+20)/(25+25+30+20) or 0.5.
<br>Hence, half of the additional funding need will be financed by equity, which is 0.5*20 or \$10 million
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<br>2. How much of the equity financing must come from the sale of new common stock?
<br>We calculated in part 1 that \$10 million will be financed by equity (common and retained earnings).
<br>We are supposed to maintain the same capital structure, so the question boils down to, how do we preserve the same ratio as we previously had?
<br>The ratio (common stock/equity) before and after financing must be the same. Hence,
<br>30/(20+ 30) = x/10
<br>Or x = \$6 million. This amount must be financed by the sale of new common stock.
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<br>3. What is Caribbean's weighted average cost capital?