Question

Getler Inc.'s projected capital budget is $2,000,000, its target capital structure is 40% debt and 60% equity, and its forecasted net income is $1,000,000. If the company follows a residual dividend policy, how much dividends will it pay or, alternatively, how much new stock must it issue?

Dividends Stock Issued

a. $514,425 $162,901

b. $541,500 $171,475

c. $570,000 $180,500

d. $600,000 $190,000

e. $ 0 $200,000

Answer

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