Banerjee Inc

question 32

Multiple Choice

Banerjee Inc. wants to maintain a target capital structure with 30% debt and 70% equity. Its forecasted net income is $550,000, and its board of directors has decreed that no new stock can be issued during the coming year. If the firm follows the residual dividend policy, what is the maximum capital budget that is consistent with maintaining the target capital structure?

• A) $673,652
• B) $709,107
• C) $746,429
• D) $785,714
• E) $825,000

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Definitions:

Certainty

A state of being sure or confident about something without any doubt.

Uncertainty

The state of being unsure or not having all the information, which makes outcomes unpredictable.

Specific Result

A distinct outcome or effect that is the aim of an action or plan.

Large Number

A numeric value that is significantly larger than those found in everyday experiences, often requiring special mathematical concepts to understand and manipulate.