Question

If common equity financing is 60% of the optimal capital structure and the existing limit of internal equity is $500,000. Solve for the equity break point.

Answer 1

$833,333

Step-by-step explanation:

The computation of the equity break point would be

= Existing limit of internal equity ÷ common equity financing percentage

= $500,000 ÷ 60%

= $833,333

Simply we divide the existing limit of internal equity by the common equity financing percentage so that the equity break point can be calculated

Hence, we consider the both the items values which are given in the question.