Sheehan Corp

question 60

Multiple Choice

Sheehan Corp.is forecasting an EPS of $3.00 for the coming year on its 500,000 outstanding shares of stock.Its capital budget is forecasted at $800,000,and it is committed to maintaining a $2.00 dividend per share.It finances with debt and common equity,but it wants to avoid issuing any new common stock during the coming year.Given these constraints,what percentage of the capital budget must be financed with debt?

• A)30.54%
• B)32.15%
• C)33.84%
• D)35.63%
• E)37.50%

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Definitions:

Accounts Receivable

Accounts receivable refer to the money owed to a company by its customers for goods or services already delivered but not yet paid for.

Allowance for Doubtful Accounts

An account that offsets assets, specifically designed to anticipate the part of accounts receivable that might be uncollectible.

Aging Method

A technique used in accounting to estimate uncollectible accounts receivable by categorizing them based on the length of time they have been outstanding.

Allowance for Doubtful Accounts

A contra-asset account used to reduce the total receivables reported to reflect only the amounts expected to be collected.