How large will capital budget be before company must issue new CS?

Capital budget = Capital raised

Debt = 0.3 Capital raised

Preferred = 0.1 Capital raised

Equity = 0.6 Capital raised

= 1.0 Total capital

Equity = RE = 0.6 Capital raised, so

Capital raised = RE/0.6.

Previous slide

Next slide

Back to first slide

View graphic version