Badger Tool and Die Company Has 100,000 Shares Outstanding and Plans

question 50

Multiple Choice

Badger Tool and Die Company has 100,000 shares outstanding and plans to pay $1.00 per share in dividends each quarter next year.Badger has a capital budget of $700,000 for next year and plans to maintain its present debt ratio of 0.30.If earnings are expected to be $7.20 per share, how much external equity must Badger raise?

• A)$210,000
• B)$490,000
• C)$170,000
• D)none

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Definitions:

Contra Asset Account

An account on a balance sheet that reduces the value of an associated asset account, such as accumulated depreciation.

Accumulated Depreciation

Accumulated depreciation is the total amount of depreciation expense that has been recorded for an asset, representing how much of its value has been depleted over time.

Cost Expiration

A concept in accounting indicating the point at which a cost becomes an expense, typically when a cost directly contributes to generating revenue.

Intangibles

Assets that lack physical substance, such as patents, trademarks, and goodwill, which can still provide economic benefit to the business.