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# Jan. 1 the total market value of the Tysseland Co. was \$60

### Resolved Question:

Jan. 1 the total market value of the Tysseland Co. was \$60 million. During the first year the company plans to raise & invest \$30 million in new projects. The firms present market value structure is considered to be optimal. Assume that there is no short-term debt: Debt \$30 million + common equity \$30 million = \$60 million total capital. New bonds will have a 8% coupon rate & they will be sold at par. Common stock is currently selling at \$30 a share. Stockholders' required rate of return expected constant growth rate of 8%. (the next expected dividend pymt is \$1.20, so \$1.20/\$30 = 4%) a. to maintain the present capital structure, how much of the new investment must be financed by common equity? the answer is \$15,000,000 how do I arrive at this number? b. Assume there is sufficient cashflow so the co. can maintain its target capital structure w/o issuing additional shares of equity. what is the WACC? answer is 8.4%, how do I arrive at this number?
Submitted: 8 years ago.
Category: Finance
Expert:  Manal Elkhoshkhany replied 8 years ago.

Hello and welcome to Just Answer

Kindly advise the name of the book you are using: Title, author's name, and edition

Thank you

Customer: replied 8 years ago.
11TH EDITION, FINANCIAL MANAGEMENT, EUGENE BRIGHAM & MICHAEL EHRNHARDT
Expert:  Manal Elkhoshkhany replied 8 years ago.

Thank you

P.S. If you like my work, please feel free to direct your future posts to me specifically by typing "For BusinessTutor" at the beginning of your post.

Please note that you did not type the tax rate, but I found the question and it stated that the tax rate is 40%

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