Victor Rumsfeld Inc

question 21

Multiple Choice

Victor Rumsfeld Inc.'s dividend policy is under review by its board.Its projected capital budget is $2,000,000, its target capital structure is 60% debt and 40% equity, and its forecasted net income is $600,000.If the company follows a residual dividend policy, what total dividends, if any, will it pay out?

• A) $240,000
• B) $228,000
• C) $216,600
• D) $205,770
• E) $0

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Definitions:

Cash Flow Growth Rate

The rate at which a company's cash flow from operations grows over a specific time period, indicating financial health and performance.

Required Rate of Return

The minimum yearly return rate that convinces individuals or firms to put their investment into a certain security or project.

Canadian Pacific Railroad

A historic railway company in Canada, established in the 19th century, playing a significant role in the development of the nation's commerce and industry.

Yield

The income return on an investment, such as the interest or dividends received, often expressed as a percentage of the investment's cost or current value.