Determining capital structure in balance

Reference no: EM13141023

Fauver Industries plans to have a capital budget of $650,000. It wants to maintain a target capital structure of 40% debt and 60% equity, and it also wants to pay a dividend of $375,000. If the company follows the residual dividend policy, how much net income must it earn to meet its investment requirements, pay the dividend, and keep the capital structure in balance?

1. $895,050

2. $765,000

3. $787,950

4. $757,350

5. $627,300

Reference no: EM13141023

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