The Clydesdale Corporation has an optimal capital structure consisting of 70 percent debt and 30 percent equity.The marginal cost of capital is calculated to be 14.75 percent.Total earnings available to common stockholders for the coming year total $1,200,000.Investment opportunities are:
a.According to the residual dividend theory,what should the firm's total dividend payment be?
b.If the firm paid a total dividend of $675,000,and restricted equity financing to internally generated funds,which projects should be selected? Assume the marginal cost of capital is constant.
Definitions:
Modern Firms
Refers to contemporary businesses characterized by innovative practices, technology use, and agile structures.
Foreign Countries
Nations or territories outside one's own country, governed by distinct legal, political, and cultural systems.
Independent Contractor
An individual or entity contracted to perform work for another entity as a non-employee, typically retaining control over how their work is completed.
Employee
An individual who is hired by a company to perform specific duties in exchange for compensation, typically under the control and direction of the employer.
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