Bass Frozen Foods, Inc has found three acceptable investment ...

[nramada]

Bass Frozen Foods, Inc has found three acceptable investment opportunities. The three projects require a total
  of 5 million in financing. It is the company's policy to finance its investments by using 40 debt and 60
  common equity.
 
  The firm has generated 3.8 million dollars from its operations that could be used to finance the
  common equity portion of its investments.
  a. What portion of the new investments will be financed by common equity and what portion by debt?
  b. According to the residual dividend theory, how much would be paid out in dividends?

Question 2

With regard to the hedging principle, which of the following would be an appropriate method to
  finance a minimum level of current assets required for year round operations?
 
  A) common stock
  B) trade credit
  C) short-term notes payable
  D) revolving credit agreements that must be repaid in a period less than 1 year

[britb2u]

Answer to Question 1

a. Common equity = .60  5 million = 3,000,000
Debt = .40  5 million = 2,000,000
b. Dividends = 3,800,000 - 3,000,000 = 800,000

Answer to Question 2

A

[nramada]

Gracias!

[irishcancer18]

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