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MBA,MCS,M.phil
Devry University
Jan-2008 - Jan-2011
MBA,MCS,M.Phil
Devry University
Feb-2000 - Jan-2004
Regional Manager
Abercrombie & Fitch.
Mar-2005 - Nov-2010
Regional Manager
Abercrombie & Fitch.
Jan-2005 - Jan-2008
The management of Ferri Phosphate Industries (FPI) is planning next year's capital budget. FPI projects its net income at $7,500, and its payout ratio is 40 percent The company's earnings and dividends are growing at a constant rate of 5 percent; the last dividend paid, D0, was $0.90; and the cu rrent stock price is $859. FPI's new debt will cost 14 percent If FPI issues new common stock, flotation costs will be 20 percent. FPI is at its optimal capital structure, which is 40 percent debt and 60 percent equity, and the firm's marginal tax rate is 40 percent FPI has the following independent indivisible, and equally risky investment opportunities:

What is FPI's optimal capital budget?
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