United Builders Wants to Maintain a Target Capital Structure with 30

question 28

Multiple Choice

United Builders wants to maintain a target capital structure with 30% debt and 70% equity.Its forecasted net income is $550,000, and because of market conditions, the company will not issue any new stock during the coming year.If the firm follows the residual dividend policy, what is the maximum capital budget that is consistent with maintaining the target capital structure?

• A) $673,652
• B) $709,107
• C) $746,429
• D) $785,714
• E) $825,000

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Definitions:

Conditioned Response

A learned reaction to a previously neutral stimulus due to repeated association with an unconditioned stimulus.

Unconditioned Response

An automatic, natural reaction to a stimulus that occurs without prior conditioning.

Rescorla-Wagner

A model proposing that the strength of a conditioned response depends on the unexpectedness of the unconditioned stimulus.

Comparator Theory

The theory that the ability of a particular stimulus to elicit a conditioned response (CR) depends upon a comparison of the level of conditioning to that stimulus and to other stimuli paired with the unconditioned stimulus (UCS).