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    External financing

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    If a firm uses external financing as a plug item, has a new capital budget of $3 million, a net income of $4 million, and a plowback ratio of 35%, how much should be raised in external funds?

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    Solution Preview

    Total funds needed are 3,000,000

    Net Income = 4,000,000
    A plowback ratio of 35% ...

    Solution Summary

    The solution explains how to calculate the amount of external financing needed.