1. What are retained earnings for the last year?
2. How much debt will be needed for the new project?
3. How much external equity must the company use at the beginning of this year in order to finance the new expansion?
4. If the company decides to retain all earnings for the coming year, how much external equity will be required?
This material may consist of step-by-step explanations on how to solve a problem or examples of proper writing, including the use of citations, references, bibliographies, and formatting. This material is made available for the sole purpose of studying and learning - misuse is strictly forbidden.Given that:
Investment needed $5.000.000
Debt to asset ratio 40%
Dividend payout ratio 50%
Net income $2.500.000
Retained earnings = (1 - Dividend payout ratio) * Net income
Here it is $1.250.000 ...