Marble Construction estimates that its WACC is 12% if equity comes from retained earnings. However, if the company issues new stock to raise new equity, it estimates that its WACC will rise to 12.5%. The company believes that it will exhaust its retained earnings at $2,700,000 of capital due to the number of highly profitable projects available to the firm and its limited earnings. The company is considering the following seven investment projects: Project Size IRR $ 630,000 13.8% 1,050,000 13.7 990,000 12.1 D 1,220,000 13.1 480,000 630,000 E 12.2 F 11.8 660,000 13.4 Assume that each of these projects is independent and that each is just as risky as the firm's existing assets. Which set of projects should be accepted? Project A Project B Project C -Select- Select -Select Project D -Select -Select- -Select- Project E Project F Project G -Select- What is the firm's optimal capital budget? Round your answer to the nearest dollar.

Marble Construction estimates that its WACC is 12% if equity comes from retained earnings. However, if the company issues new stock to raise new equity, it estimates that its WACC will rise to 12.5%. The company believes that it will exhaust its retained earnings at $2,700,000 of capital due to the number of highly profitable projects available to the firm and its limited earnings. The company is considering the following seven investment projects: Project Size IRR $ 630,000 13.8% 1,050,000 13.7 990,000 12.1 D 1,220,000 13.1 480,000 630,000 E 12.2 F 11.8 660,000 13.4 Assume that each of these projects is independent and that each is just as risky as the firm's existing assets. Which set of projects should be accepted? Project A Project B Project C -Select- Select -Select Project D -Select -Select- -Select- Project E Project F Project G -Select- What is the firm's optimal capital budget? Round your answer to the nearest dollar.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 11P

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United Builders wants to maintain a target capital structure with 30% debt and 70% equity. Its forecasted net income is $600,000, and because of market conditions, the company will not issue any new stock during the coming year. If the firm follows the residual dividend policy, what is the maximum capital budget that is consistent with maintaining the target capital structure? Select the correct answer. a. $856,402 b. $857,143 c. $856,896 d. $856,649 e. $857,390
Marble Construction estimates that its WACC is 10% if equity comes from retained earnings. However, if the company issues new stock to raise new equity, it estimates that its WACC will rise to 10.8%. The company believes that it will exhaust its retained earnings at $2,800,000 of capital due to the number of highly profitable projects available to the firm and its limited earnings. The company is considering the following seven investment projects: Project A Project D Project C V V Project A 8 fidact V C D E T G Assume that each of these projects is independent and that each is just as risky as the firm's existing assets. Which set of projects should be accepted? 4 Project D Project E Project F Project O What is the firm's optimal capital budget? Round your answer to the nearest dollar. Size $ 600,000 1,040,000 1,040,000 1,250,000 540,000 600,000 670,000 IRR 14.4% 13.2 10.3 11.2 10.6 114 10.0
ix Browne, Incorporated estimates that its break point (BPRE) is $12 million, and its WACC is 9.8 percent if common equity comes from retained earnings. However, if the company issues new stock to raise new common equity, it estimates that its WACC will rise to 10.8 percent. The company is considering the following equal-life investment projects: Project A B с D Size $4 million 6 million 3 million 5 million What is the firm's optimal capital budget? a. $10 million b. $13 million c. $15 million d. $18 million e. None of the above IRR 11.4% 11.9 10.1 10.3
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Firm A has 11 equally risky capital budgeting projects, each costing $29.608 million and each having an expected rate of return of 8.25%. Firm A's retained earnings breakpoint is $296.08 million. The firm's WACC using retained earnings is 8.0% but increases to 8.5% if new equity must be issued. The company invests in projects where the expected return exceeds the cost of capital. How much capital should Firm A raise and invest? Note: answer is in millions of dollars, enter only the number
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