Brock Brothers Wants to Maintain Its Capital Structure That Is

question 44

Multiple Choice

Brock Brothers wants to maintain its capital structure that is 30 percent debt, and 70 percent equity. The company forecasts that its net income this year will be $1,000,000. The company follows a residual distribution policy (with all distributions in the form of dividends) , and anticipates a dividend payout ratio of 40 percent. What is the size of the company's capital budget?

• A) $ 600,000
• B) $ 857,143
• C) $1,000,000
• D) $1,428,571
• E) $2,000,000

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Definitions:

Market Price

The current price at which a good or service can be bought or sold in a market.

Production Costs

Expenses incurred in the process of creating a product or service, including labor, materials, and overheads.

Property Rights

Legal rights to use, control, and dispose of property, including real estate, intellectual property, and tangible goods.

Sustainable Rate

A rate of growth or extraction that can be maintained over time without depleting resources or causing environmental damage.