Dandy Pandas Japan affiliated company presents a capital structure which is also its target capital structure, which calls for 50% debt and 50% common equity. Tokyos manufacturing has only one (1) potential project, an expansion program with a 10.2% IRR and a cost of USD 20 million. However, the project is completely divisible, that is Pandas directors can decide to invest any amount up to USD 20 million. Tokyo expects to retain $3 million of earnings next year. It can raise debt at a pre-tax annual cost of 10%. The cost of the retained earnings in the Balance sheet would be 12% per year. Dandy Panda Japan can sell new stock at a constant cost of new equity of 15%. Japan has a marginal tax rate of 40% What is Dandy Pandas Japan optimal Capital Budget to be calculated by the Company between zero and USD 20 million? Hint: calculate the breakeven point and find the cost before and after break-even, express your assumptions in the calculations

Dandy Panda's Japan affiliated company presents a capital structure which is also its target capital structure, which calls for 50% debt and 500% common equity. Tokyo's manufacturing has only one (1) potential project, an expansion program with a 10.2% IRR and a cost of USD 20 million. However, the project is completely divisible, that is Panda's directors can decide to invest any amount up to USD 20 million. Tokyo expects to retain $3 million of earnings next year. It can raise debt at a pre-tax annual cost of 10%. The cost of the retained earnings in the Balance sheet would be 12% per year. Dandy Panda Japan can sell new stock at a constant cost of new equity of 15%. Japan has a marginal tax rate of 40% What is Dandy Panda's Japan optimal Capital Budget to be calculated by the Company between zero and USD 20 million? Hint: calculate the breakeven point and find the cost before and after break-even, express your assumptions in the calculations