gardial green light a manufacturer of energy efficent lighting solutions, has ha

Question

gardial green light a manufacturer of energy efficent lighting solutions, has had suck success with it new product that it is planning to substantially expland its manufacturing, capital with $15 million investment in new machinery . gardial plan to maintain its current 30 % debt to total assets ratio for its capital structure and to maintain its dividend policy in which at the end of each year its distributes 55% of the years net income. This years net income was $8million. How much external equity must Gardial seek now to expand as planned work in excel

Explanation / Answer

Net Income = 8 Million $

as per dividend policy, 55% of this income is to be distributed which = 0.55* 8 = 4.4 Million

Income left 3.6 Million $

For buying a capital of 15 Million $, left capital = 15 - 3.6 = 11.4

Remaining 11.4 also needs to be raised in 30 to 70 ratio to maintain the D/E ratio of 30:70

So 70% of 11.4 is 7.98 Million $

ExtrenAL equity Gardinal to seek = 7.98$

Related Questions

Navigate

• Browse (All)
• Browse G
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.