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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Definitions:

Prematurely

Occurring or done before the usual or proper time; too early.

Developmental Psychologist

A professional who studies the psychological growth of individuals, including cognitive, emotional, and social development, throughout different stages of life.

Older

Referring to individuals or entities that have existed for a significant period of time, often implying greater experience, maturity, or age compared to others.

Changes

The act or process through which something becomes different, often leading to new directions in life, behavior, or operation.