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Question
Purcell Farms Inc. has the following data, and it follows the residual dividend model. Currently, it finances with 10% debt. Some Purcell family members would like for the dividend payout ratio to be increased. If Purcell increased its debt ratio, which the firm's treasurer thinks is feasible, by how much could the dividend payout ratio be increased, holding other things constant?
Capital budget $3,000,000
Net income (NI) $3,500,000
% Debt now 10%
% Debt after change 53%
u200b
a. 28.0%
b. 39.1%
c. 38.3%
d. 31.7%
e. 36.9%
Answer
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Related questions
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u200b u200b
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b. Time lines are not useful for visualizing complex problems prior to doing actual calculations.
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d. Time lines can be constructed for annuities where the payments occur at either the beginning or the end of the periods.
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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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