New York Yankee Enterprises Ltd. wants to expand it's baseball empire and is considering
acquiring a new minor league franchise. The franchise will cost $5,000,000. According to
financial projections made by management, it is anticipated that the minor league franchise
will earn a return on this investment (ROA) of 16%.
In order to obtain the $5,000,000 of financing required to undertake this investment,
management plans to do the following:
Obtain a long-term bank loan.		$ 1,500,000
Issue preferred shares		800,000
Issue common shares ..		2,200,000
Utilize retained earnings ..		500,000
		$ 5,000,000
Terms of each source of financing is presented below.
Additional Information:
(a) The company's corporate income tax rate is 40%.
(b) The company's growth rate is 7%.