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Flavortech Inc. expects EBIT of $2,000,000 for the coming year. The firms capital structure consists of 40% debt and 60% equity, and its marginal tax
Flavortech Inc. expects EBIT of $2,000,000 for the coming year. The firms capital structure consists of 40% debt and 60% equity, and its marginal tax rate is 40%. The company pays a 10% rate on its $5,000,000 of long-term debt and has 1,000,000 shares of common stock outstanding. In its next capital budgeting cycle, the firm expects to fund one large positive NPV project costing $900,000, and it will fund this project in accordance with its target capital structure. The firm follows a residual distribution policy and there are no other projects for the company. What is its expected ratio
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