Assuming you worked for a corporation that wanted to increase plant capacity with an estimated cost...

Assuming you worked for a corporation that wanted to increase plant capacity with an estimated cost of $26m, what are some of the options you might suggest to the management to pay for such an expansion? what are the limitations of my question?

Expert Solution

Some of the options that I will suggest to the management to pay for expansion with an estimated cost of $26 m are:

· Internally generated funds – This is also known as retained earnings. This is one of the safest methods of funding. There is, however, a cost associated with using retained earnings and that will be the earnings foregone by the shareholders. It will be in the form of an opportunity cost.

· Bank loans – The firm can raise the required amount of $26m in the form of bank loans. It can be in the form of line of credit loans, installment loans, balloon loans and interim loans. The advantage is that loans can be obtained easily if the financials of the company is proper. On the downside it will increase the company’s use of leverage and its interest expenses will go up significantly.

· Equity – The company has the option of raising fresh equity. This is an easy method for raising funds as new equity can be issued to current shareholders in the form of right issues. The company can also consider issuing new equity in the market. The downside will be that it will reduce the earnings of the existing shareholders.

The limitations of your question are that you have not provided the existing financials of the corporation. If the current financial position of the company was provided I would have been in a better situation to advice with regards to the optimal option that the management can use for raising $26m.

jeff jeffy answered 2 years ago

Total estimated cost of trip $45,500 Assuming that your estimated total cost will grow by 2.5%...

Total estimated cost of trip $45,500 Assuming that your estimated total cost will grow by 2.5% per year (due to inflation), demonstrate how you would compute the expected future cost of your dream vacation Suppose that you can invest money every month into a fee-free mutual fund and that this fund is expected to have a 10% nominal annual rate of return. Using your estimated future cost (including inflation) as future value, determine the amount of money you must save...

NPH wants to increase capacity by 40% with a $10 million investment in plant and machinery....

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.

Zephram Corporation has a plant capacity of 200,000 units per month. Unit costs at capacity are:...

Zephram Corporation has a plant capacity of 200,000 units per month. Unit costs at capacity are: Direct materials $6.00 Direct labor 5.00 Variable overhead 4.00 Fixed overhead 2.00 Marketing—fixed 6.00 Marketing/distribution—variable 4.60 Current monthly sales are 190,000 units at $30.00 each. Q, Inc., has contacted Zephram Corporation about purchasing 2,500 units at $24.00 each. Current sales would not be affected by the one-time-only special order. What is Zephram's change in operating profits if the one-time-only special order is accepted?

Your company wants to build a new plant in China to increase its capacity for producing...

Your company wants to build a new plant in China to increase its capacity for producing a new polymer that is being used widely in consumer goods there. To build the plant, the company would need to pay $175,000,000 now, $150,000,000 at the beginning of next year (i.e. or you can think of it as the end of the first year, whichever you like), and $125,000,000 at the end of the second year to have the plant built. It will...

16. Assuming that the standard fixed overhead rate is based on full capacity, the cost of...

16. Assuming that the standard fixed overhead rate is based on full capacity, the cost of available but unused productive capacity is indicated by the a. fixed factory overhead volume variance b. direct labor time variance c. direct labor rate variance d. variable factory overhead controllable variance 17.A company records its inventory purchases at standard cost but also records purchase price variances. The company purchased 5,000 widgets at $8.00 each, and the standard cost for the widgets is $7.60. Which...

The annual direct production cost for a plant operation at 70% capacity are $280000 while the...

The annual direct production cost for a plant operation at 70% capacity are $280000 while the sum of the annual fixed charges, overhead costs, and general expenses is $200000. What is the break-even pint in the unit of production per year if total annual sales are $560000 and the product sales at $40/unit? What were the annual gross earnings and the net profit for this plant at 100% capacity in year 1974 when corporate income tax required a 22% normal...

When the capacity of a hydrogen plant is doubled, the capital cost increases by 73%. 1.1....

When the capacity of a hydrogen plant is doubled, the capital cost increases by 73%. 1.1. Why does the capital cost not double when the capacity is doubled? (2) 1.2. Derive an equation that relates the capacity to the capital cost for this particular hydrogen plant. (6) 1.3. If the six-tenth rule is used, what would be the increase in the capital cost if the hydrogen plant capacity is doubled? Compare this increase with the 73% mentioned above and comment....

A plant asset acquired on October 1, 2022 at a cost of $800,000 has an estimated...

A plant asset acquired on October 1, 2022 at a cost of $800,000 has an estimated useful life of 10 years. The salvage value is estimated to be $50,000 at the end of the asset's useful life. Instructions Determine the depreciation expense for the first two years using the: (a) straight-line method. (b) double-declining-balance method.

A plant asset with a cost of $270,000, estimated life of 5 years, and residual value...

A plant asset with a cost of $270,000, estimated life of 5 years, and residual value of $45,000, is depreciated by straight-line method. This asset is sold for $190,000 at the end of the 2nd year. a) Prepare the entry for depreciation for the year? b) Prepare the entry for the sales of the asset.

This is for Cosmochemistry a) Assuming you wanted to study aqueously mediated chemistry and parent-body processing...

This is for Cosmochemistry a) Assuming you wanted to study aqueously mediated chemistry and parent-body processing on an asteroid in the early solar system, name two materials you might study and why. b) In comparison, if you were interested in understanding vapor-phase condensation in the early solar nebula, name two materials you might examine and why.

Question