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Morrison Movers's optimal capital structure calls for financing seventy percent of new assets with equity. Assuming that Morrison Movers has net income of $5 million, how much can be paid out in the form of a dividend and still have sufficient funds to cover a $6 million capital budget?
a. $0, it needs all of the funds for expansion
b. $ 800,000
c. $4,200,000
d. $5,000,000

Solution Preview

Answer: b. $ 800,000

Amount required for capital budget= $6.00
70% 0f ...

Solution Summary

Calculates the amount of dividends.