Clark Farms Inc

question 66

Multiple Choice

Clark Farms Inc. has the following data, and it follows the residual dividend model. Currently, it finances with 15% debt. Some Clark family members would like for the dividends to be increased. If Clark increased its debt ratio, which the firm's treasurer thinks is feasible, by how much could the dividend be increased, holding other things constant?

• A) $1,093,500
• B) $1,215,000
• C) $1,350,000
• D) $1,485,000
• E) $1,633,500

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Definitions:

Loan Amount

The total sum of money borrowed by an individual or entity from a lender, which is expected to be repaid with interest.

Future Value

The value of a current asset at a specified date in the future based on an assumed rate of growth over time.

Present Value

The current evaluation of a forthcoming cash amount or cash flow series, considering a specific rate of financial return.

Land Rent

Land rent is the payment made for the use of a piece of land, representing the value derived from its use.