Closing case chapter 15 - upon whether the shareholders...

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Closing Case McKenzie Corporation’s Capital Budgeting 1) Expected value With expansion .30x26,000= 7,800 .50x48,000= 24,000 .20x57000=11,400 Without expansion .30x22,000= 6600 .50x35000=17500 .20x45000=9000 I believe the stockholders are better off without expansion as our text states the higher the payoff to bond holders the lesser the payoff to shareholders depending
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Unformatted text preview: upon whether the shareholders contributed. 2) Expected value of debt With expansion 28000-22000=6000 Without expansion 3) 4) If company is not expanding the price of the bond will decrease causing an increase of purchasing. 5) If company doesn’t expand it could lead to job security as well as making sure all has been accounted for. 6)...
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