If the firm wants to maintain its same debt-to-equity ratio, Finance Basics

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If the firm wants to maintain its same debt-to-equity ratio

Question: A firm reports net income of $433,550.00 for 2013. The firm has a dividend payout ratio of 24.00%. The firm currently has $988,150.00 in debt, and $1,650,600.00 in shareholder equity. The firm pays 6.00% annual interest on their outstanding debt.

If the firm wants to maintain its same debt-to-equity ratio, how much debt can the firm issue in the coming year IF the firm will not issue any new shares?

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Finance Basics: If the firm wants to maintain its same debt-to-equity ratio

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