Dentaltech Inc A)372%
B)39

question 54

Multiple Choice

Dentaltech Inc.projects the following data for the coming year.If the firm follows the residual dividend policy and also maintains its target capital structure,what will be its payout ratio? $\begin{array}{lrlr}\text { EBIT } & \$ 2,000,000 & \text { Capital budget } & \$ 850,000 \\\text { Interest rate } & 10 \% & \% \text { Debt } & 40 \% \\\text { Debt outstanding } & \$ 5,000,000 & \% \text { Equity } & 60 \% \\\text { Shares outstanding } & \$ 5,000,000 & \text { Tax rate } & 40 \%\end{array}$

• A)37.2%
• B)39.1%
• C)41.2%
• D)43.3%

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Definitions:

Lost Profits

Refers to the potential earnings a business was unable to realize due to wrongful actions by another party.

Insolvent

A financial state where an individual or entity cannot meet their debts as they become due.

Down Payment

An initial upfront portion of the total amount due, typically in the context of purchasing expensive goods like cars or real estate, representing a fraction of the full price to reduce the loan amount.

Misrepresenting Solvency

Falsely presenting a company's or individual's financial stability or ability to pay debts, often to secure loans or delay bankruptcy.