Assume a company has  a capital structure of 50%, 40% and 10% respectively for equity, debt and preferred stock. The company is planning to expand its operations from next year and expects to raise sh. 800M in net income this year with a dividend payout of 10%;

Required:

i)what is the breakpoint?

ii)how much will be raised from equity, preferred stock and debt respectively at break point?

Answer rating: 100% (QA)

To determine the breakpoint we need to find the point at which the cost of new financing exceeds the ... View the full answer