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    If the firm maintains a residual dividend policy and will keep its optimal capital structure intact, what will be the amount of the dividends it pays out after financing its capital budget?

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    1) Driver Corporation has plans calling for a capital budget of $60 million. Its optimal capital structure is 60 percent equity and 40 percent debt. Its earnings before interest and taxes (EBIT) were $98 million for the year. The firm has $200 million in assets, pays an average of 10 percent on all its debt, and faces a marginal tax rate of 35 percent. If the firm maintains a residual dividend policy and will keep its optimal capital structure intact, what will be the amount of the dividends it pays out after financing its capital budget?

    a. $22.5 million
    b. $59.4 million
    c. $60.0 million
    d. $30.0 million
    e. $ 0

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    https://brainmass.com/business/capital-budgeting/maintain-residual-dividend-policy-and-keep-optimal-capital-80411

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    1) Driver Corporation has plans calling for a capital budget of $60 million. Its optimal capital structure is 60 percent equity and 40 percent debt. Its earnings before interest and taxes (EBIT) were $98 million for the year. The firm has $200 million in assets, pays ...

    Solution Summary

    The expert examines how to maintain residual dividend policy and keep optical capital.

    $2.19

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