The patterson Hale Trucking Company needs to expand it fleet by 90% to meet the

Question

The patterson Hale Trucking Company needs to expand it fleet by 90% to meet the demands of 2 major contracts, the cost of expansion is estmated to be $15 million. PHT maintains a 30 % debt ratio and pays out 90% of its earnings in common stock dividends each year. A) If PHT earns $4 million next year, how much common stock will the firm need to sell in order to maintain its target capital structure? ________ million, round 2 decimal places. b) If PHT wants to avoid selling any new stock but wants to maintain a constant dividend payout % of 90%, how much can the firm spend on new capital expenditures? _________million, round 2 decimal places.

Explanation / Answer

b) if PHT wants to avoid selling any new stock but wants to maintain a constant dividend payout firm can sell off the old stocks and can spend 15.00 million worth of stocks for expansion

A) Amt In Millions 100% Equity 90% expansion earns 16.67 15.00300 4.00000 30% debt dividend (90%) 5.001 3.6 available (EQ) Needs to Sell 0.40000 million

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