Allison Engines Corporation has established a target capital structure of 40 percent debt and 60 percent common equity. The firm expects to earn $150,000 in after-tax income during the coming year, and it will retain 30 percent of those earnings. What is the break point of retained earnings?
A. $175,000
B. $75,000
C. $112,500
D. $500,000
E. $250,000
Answer: B
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