The Blunt Trucking Company needs to expand its fleet by 40 percent to meet the demands of
Question:
The Blunt Trucking Company needs to expand its fleet by 40 percent to meet the demands of two major contracts it just received to transport military equipment from manufacturing facilities scattered across the United States to various military bases. The cost of the expansion is estimated to be $10 million. Blunt maintains a 30 percent debt ratio and pays out 50 percent of its earnings in common stock dividends each year.
a. If Blunt earns $4 million in 2015, how much common stock will the firm need to sell in order to maintain its target capital structure?
b. If Blunt wants to avoid selling any new stock but wants to maintain a constant dividend payout percentage of 50 percent, how much can the firm spend on new capital expenditures?
Common StockCommon stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
Step by Step Answer:
CONSTANT DIVIDEND PAYOUT RATIO POLICY DATA Expansion rat...View the full answer
Foundations Of Finance
ISBN: 9780134083285
9th Edition
Authors: Arthur J. Keown, John H. Martin, J. William Petty
