Driver Corporation Faces an IOS Schedule Calling for a Capital

question 51

Multiple Choice

Driver Corporation faces an IOS schedule calling for a capital budget of $60 million.Its optimal capital structure is 60 percent equity and 40 percent debt.Its earnings before interest and taxes (EBIT) were $98 million for the year.The firm has $200 million in assets,pays an average of 10 percent on all its debt,and faces a marginal tax rate of 34 percent.If the firm maintains a residual dividend policy and will keep its optimal capital structure intact,what will be the amount of the dividends it pays out after financing its capital budget?

• A) $23.4 million
• B) $59.4 million
• C) $20.76 million
• D) $30.0 million
• E) $0

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