Question
Meghan the CFO of Lokay technolo9gy incorporated is planning next years capital budget. it is at its optimal capital structure which is 30 % debt
Meghan the CFO of Lokay technolo9gy incorporated is planning next years capital budget. it is at its optimal capital structure which is 30 % debt and 70% common equity and the company earnings and dividends are growing at a constant rate of 12%. The last dividend, was $1.70 and the company's stock currently sells at a price of $23 per share. The firm can raise debt at a 6.5% before tax cost and is projecting net income to be $1,500,000 with dividend payout ratio of 20%. If the firm issues new common stock, a 6% flotation cost will incurred. the firms Marginal tax rate is 40%. IF the company spending $2.5 Million on new capital how much new common stock must be sold?
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