Last Year Gator Getters,Inc

question 74

Essay

Last year Gator Getters,Inc.had $50 million in total assets.Management desires to increase its plant and equipment during the coming year by $12 million.The company plans to finance 40 percent of the expansion with debt and the remaining 60 percent with equity capital.Bond financing will be at a 9 percent rate and will be sold at its par value.Common stock is currently selling for $50 per share,and flotation costs for new common stock will amount to $5 per share.The expected dividend next year for Gator is $2.50.Furthermore,dividends are expected to grow at a 6 percent rate far into the future.The marginal corporate tax rate is 34 percent.Internal funding available from additions to retained earnings is $4,000,000.
a.What amount of new common stock must be sold if the existing capital structure is to be maintained?
b.Calculate the weighted marginal cost of capital at an investment level of $12 million.

---

Definitions:

Constitution

is a set of fundamental principles or established precedents according to which a state or other organization is governed.

Article X

A specific provision, section, or clause within a constitution, treaty, or legal document, often requiring context to determine its specific content or implications.

Roe V. Wade

A landmark Supreme Court decision in 1973 that established a woman's legal right to an abortion under specific conditions.

First Trimester

The initial three months of pregnancy, a critical period for fetal development.