& CoHas a Capital Budget of $3,000,000

question 34

Multiple Choice

& Co.has a capital budget of $3,000,000.The company wants to maintain a target capital structure that is 15% debt and 85% equity.The company forecasts that its net income this year will be $3,500,000.If the company follows a residual dividend policy, what will be its total dividend payment?

• A)$205,000
• B)$500,000
• C)$950,000
• D)$2,550,000
• E)$3,050,000

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Definitions:

Separate Agreement

A distinct contract or arrangement that is made independently from any other agreements or contracts.

Negotiable

Refers to a written and signed promise or order to pay a specific sum of money that can be transferred from one holder to another with the ownership of the document constituting ownership of the value.

Nonnegotiable

Refers to an item or term that cannot be altered or transferred in agreement or transaction.

Express Promise

A clear and specific commitment stated by one party to another, often forming the basis of an express contract.