Fauver Industries Plans to Have a Capital Budget of $600,000

question 17

Multiple Choice

Fauver Industries plans to have a capital budget of $600,000.It wants to maintain a target capital structure of 40% debt and 60% equity,and it also wants to pay a dividend of $300,000.If the company follows the residual dividend model,how much net income must it earn to meet its investment requirements,pay the dividend,and keep the capital structure in balance?

• A) $660,000
• B) $514,800
• C) $600,600
• D) $712,800
• E) $580,800

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