Allison Engines Corporation Has Established a Target Capital Structure of 40

question 21

Multiple Choice

Allison Engines Corporation has established a target capital structure of 40 percent debt and 60 percent common equity. The firm expects to earn $150,000 in after-tax income during the coming year, and it will retain 30 percent of those earnings. What is the break point of retained earnings?

• A)$175,000
• B)$75,000
• C)$112,500
• D)$500,000
• E)$250,000