True or False: The following statement accurately describes how firms make deosions related to issuing new common stock If a firm needs additional capital from equity sources once its retained earings breakpoint is reached, it will have to raise the capital by issuing new common stock. Folse: Firma roise capital from retained earnings only when they cannot issue new common stock due to mascot conditions outside of their control. True: Firms will raise all the equity they can from retained earnings before issuing new common stock, because capital from retained eamings is cheaper than capital raised from issuing new common stock Sunny Day Manufacturing Company is consdering investing in a one-year project that requires an initial investment of $475,000. To do so, it will have to issue new common stock and will incur a flotation cost of 2.00%. At the end of the year, the project is expected to produce a cash inflow of $550,000. The rate of return that Sunny Day expects to earn on its project (net of its flotation costs) is (rounded to two decimal places) White Lion Homebuilders has a current stock price of $33.35 per share, and is expected to pay a per-share dividend of 52.03 at the end of the year The company's earnings and dividends growth rate are expected to grow at the constant rate of 5.20% into the foreseeable future. If White Lion expects to incur fiotabon costs of 5.00% of the value of its newly-raised equity funds, then the flotation-adjusted (net) cost of its new common stock (rounded to two decimal places) should be Sunny Day Manufacturing Company Co.'s addition to this Ahmentit True: Firms will raise all the equity they can from retained earnings before issuing new common stock, because capital from retained earnings is cheaper than capital raised from issuing new common stock. Sunny Day Manufacturing Company is considering investing in a one-year project that requires an initial investment of $475,000. To do so, it will have to issue new common stock and will incur a flotation cost of 2.00%. At the end of the year, the project is expected to produce a cash inflow of $550,000. The rate of return that Sunny Day expects to earn on its project (net of its flotation costs) is (rounded to two decimal places) White Lion Homebuilders has a current stock price of $33.35 per share, and is expected to pay a per-share dividend of $2.03 at the end of the year. The company's earnings and dividends' growth rate are expected to grow at the constant rate of 5.20% into the foreseeable future. If White Lion expects to incur flotation costs of 5.00% of the value of its newly-raised equity funds, then the flotation-adjusted (net) cost of its new common stock (rounded to two decimal places) should be A Sunny Day Manufacturing Company Co.'s addition to carnings for this year is expected to be $857,000. Its target capital structure consists of 40% debt, 5% preferred, and 55% equity. Determine Sunny Day Manufacturing Company's retained earnings breakpoint: $1,558.182 $1,869,818 $2,142,500 $1,714,000
