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
D
Business
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