Origami Company Is Considering a New Project and Needs to Raise

question 165

True/False

Origami Company is considering a new project and needs to raise $800,000 of capital. Their after-tax net income would be $75,000 if they do not implement the new project. If the new project is implemented, it will add an additional $50,000 of profits before tax and interest. Origami's income tax rate is 40%. If they use debt financing, the interest will be at 5%. Origami has 25,000 shares of common stock outstanding and no preferred stock. They would have to issue an additional 10,000 shares of common stock to finance the project with equity capital.
If Origami decides to use equity financing, their earnings per share will be higher than if they use debt.

---

Definitions:

Dual Value

The concept of having two different values or outcomes in a single scenario, often used in decision making and evaluation processes.

Contribution

The portion of sales revenue that exceeds variable costs, contributing toward covering fixed costs and generating profit.

Solution Panel

A group or platform designed to bring together experts or technologies to solve specific problems or challenges.

Feasible Region

In operations research and optimization, the set of all possible points that satisfy a series of constraints, typically within linear programming problems.