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Question
Clark Farms Inc. has the following data, and it follows the residual dividend model. Currently, it finances with 20% debt. Some Clark family members would like for the dividends to be increased. If Clark increased its debt ratio, which the firm's treasurer thinks is feasible, by how much could the dividend be increased, holding other things constant?
Capital budget $3,000,000
Net income (NI) $3,500,000
% Debt now 20%
% Debt after change 73%
u200b
a. $1,923,900
b. $1,669,500
c. $1,494,600
d. $1,590,000
e. $1,192,500
Answer
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Related questions
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u200b u200b
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Which of the following statements is CORRECT?
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b. Time lines are not useful for visualizing complex problems prior to doing actual calculations.
c. Time lines cannot be constructed in situations where some of the cash flows occur annually but others occur quarterly.
d. Time lines can be constructed for annuities where the payments occur at either the beginning or the end of the periods.
e. Some of the cash flows shown on a time line can be in the form of annuity payments, but none can be uneven amounts.
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b. Time lines are useful for visualizing complex problems prior to doing actual calculations.
c. Time lines cannot be constructed in situations where some of the cash flows occur annually but others occur quarterly.
d. Time lines cannot be constructed for annuities where the payments occur at the beginning of the periods.
e. Some of the cash flows shown on a time line can be in the form of annuity payments, but none can be uneven amounts.
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b. False