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    Residual Dividend Policy

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    Ting Technology has a capital budget of $850,000, it wants to maintain a target capital structure of 35% debt and 65% equity, and it also wants to pay a dividend of $400,000. If the company follows a residual dividend policy, how much net income must it earn to meet its capital budgeting requirements and pay the dividend, all while keeping its capital structure in balance?

    A. $904,875
    B. $952,500
    C. $1,000,125
    D. $1,050,131
    E. $1,102,638

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    Solution Summary

    The solution explains how to calculate the net income that should be earned under the residual dividend policy.