Ash Inc.’s capital structure and estimated capital costs are found in Table 9-2. Note that the sum of the capital structure weights must equal 100 percent if we have properly accounted for all sources of financing and in the correct amounts. For example, Ash plans to invest a total of $3 million in common equity to fund a $5 million investment.

Because Ash has earnings equal to the $3 million it needs in new equity financing, the entire amount of new equity will be raised by retaining earnings.