Coastal Carolina Heating and Cooling Inc. has a 6-month backlog of orders for its patented solar...

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Coastal Carolina Heating and Cooling Inc. has a 6-month backlogof orders for its patented solar heating system. To meet thisdemand, management plans to expand production capacity by 50% witha $10 million investment in plant and machinery. The firm wants tomaintain a 35% debt level in its capital structure. It also wantsto maintain its past dividend policy of distributing 50% of lastyear's net income. In 2016, net income was $5 million. How muchexternal equity must Coastal Carolina seek at the beginning of 2017to expand capacity as desired? Assume that the firm uses only debtand common equity in its capital structure. Write out your answercompletely. For example, 25 million should be entered as25,000,000. Round your answer to the nearest cent.

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4.3 Ratings (654 Votes)

Net income for 2016 5 million 5000000 Since company wants to distribute 50 of its net income Dividends distributed in 2016 50 of net income 50 of 5000000 2500000 Earnings retained in 2016 net See Answer

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Coastal Carolina Heating and Cooling Inc. has a 6-month backlogof orders for its patented solar heating system. To meet thisdemand, management plans to expand production capacity by 50% witha $10 million investment in plant and machinery. The firm wants tomaintain a 35% debt level in its capital structure. It also wantsto maintain its past dividend policy of distributing 50% of lastyear's net income. In 2016, net income was $5 million. How muchexternal equity must Coastal Carolina seek at the beginning of 2017to expand capacity as desired? Assume that the firm uses only debtand common equity in its capital structure. Write out your answercompletely. For example, 25 million should be entered as25,000,000. Round your answer to the nearest cent.