Walter Industries Is a Family Owned Concern

question 76

Multiple Choice

Walter Industries is a family owned concern. It has been using the residual dividend model, but family members who hold a majority of the stock want more cash dividends, even if that means a slower future growth rate. Neither the net income nor the capital structure will change during the coming year as a result of a dividend policy change to the indicated target payout ratio. By how much would the capital budget have to be cut to enable the firm to achieve the new target dividend payout ratio?

• A) -$2,741,538
• B) -$3,046,154
• C) -$3,384,615
• D) -$3,723,077
• E) -$4,095,385

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Definitions:

Veins

Tubes forming part of the blood circulation system of the body, carrying in most cases oxygen-depleted blood towards the heart.

Axillary Artery

An artery that carries oxygenated blood to the axilla (armpit) area and to the upper limb.

Brachium

The upper arm area between the shoulder and the elbow.

Costocervical Artery

An artery that supplies blood to the upper dorsal region of the body, including parts of the neck and shoulders.