Coastal Carolina Heating and Cooling Inc. has a 6-monthbacklog of orders for its patented solar heating system. To meet this demand, managementplans to expand production capacity by 45% with a $20 million investment in plant andmachinery. The firm wants to maintain a 35% debt level in its capital structure. It also wantsto maintain its past dividend policy of distributing 55% of last year’s net income. In 2018,net income was $5 million. How much external equity must Coastal Carolina seek at the beginning of 2019 to expand capacity as desired? Assume that the firm uses only debt andcommon equity in its capital structure.

Coastal Carolina Heating and Cooling Inc. has a 6-monthbacklog of orders for its patented solar heating system. To meet this demand, managementplans to expand production capacity by 45% with a $20 million investment in plant andmachinery. The firm wants to maintain a 35% debt level in its capital structure. It also wantsto maintain its past dividend policy of distributing 55% of last year’s net income. In 2018,net income was $5 million. How much external equity must Coastal Carolina seek at the beginning of 2019 to expand capacity as desired? Assume that the firm uses only debt andcommon equity in its capital structure.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

Problem 9P

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