Answered You can hire a professional tutor to get the answer.
Tapley Inc's current (target) capital structure has a target debt ratio (D/TA) of 60 percent. The firm can raise up to $5 million in new debt at a...
Tapley Inc’s current (target) capital structure has a target debt ratio (D/TA) of 60 percent. The firm can raise up to $5 million in new debt at a before-tax cost of 8 percent. If more debt is required, the initial cost will be 8.5 percent, and if more than $10 million of debt is required, the cost will be 9 percent. Net income for the previous year was $10 million, and it is expected to increase by 10 percent this year. The firm expects to maintain its dividend payout ratio of 40 percent on the 1 million shares of common stock outstanding. If it must sell new common stock, it would encounter a 10 percent flotation cost on the first $2 million, a 15 percent cost if more than $2 million but less than $4 million is needed, and a 20 percent cost if more than $ million of new outside equity is required. Tapley’s tax is 30 percent, and its current stock price is $88 per share.1.
