Your Company Has Decided That Its Capital Budget During the Coming

question 85

Multiple Choice

Your company has decided that its capital budget during the coming year will be $20 million.Its optimal capital structure is 60 percent equity and 40 percent debt.Its earnings before interest and taxes (EBIT) are projected to be $34.667 million for the year.The company has $200 million of assets;its average interest rate on outstanding debt is 10 percent;and its tax rate is 40 percent.If the company follows the residual dividend policy and maintains the same capital structure,what will its dividend payout ratio be?

• A) 15%
• B) 20%
• C) 25%
• D) 30%
• E) 35%

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Definitions:

Source Code

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SDLC

Stands for Software Development Life Cycle, a process for planning, creating, testing, and deploying an information system.

Feasibility Study

An analysis and evaluation of a proposed project to determine if it is technically, financially, and legally possible.

Planning Phase

The initial stage of a project or process where goals are defined, strategies are developed, and tasks are planned.