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Question
The following facts apply to your company:
Target capital structure: 50% debt; 50% equity
EBIT: $200 million
Assets: $500 million
Tax rate: 40%
Cost of new and old debt: 8%
Based on the residual dividend policy, the payout ratio is 60 percent. How large (in millions of dollars) will the capital budget be?
a. $43.2
b. $50.0
c. $64.8
d. $86.4
e. $108.0
Answer
This answer is hidden. It contains 421 characters.
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