In: Finance
NPH wants to increase capacity by 40% with a $10 million investment in plant and machinery. The firm wants to maintain the current debt-to-total-asset ratio in the capital structure of 40%. It also wants to maintain the past dividend policy of distributing 45% of last year’s income as dividends. Last year’s income was $5 million. How much external equity must NPH seek for the expansion? Please show calculations. Thank you.