Fauver Industries plans to have a capital budget of $600,000. It wants to maintain a target capital structure of 40% debt and 60% equity, and it also wants to pay a dividend of $300,000. If the company follows the residual dividend model, how much net income must it earn to meet its investment requirements, pay the dividend, and keep the capital structure in balance?
A. $660,000
B. $514,800
C. $600,600
D. $712,800
E. $580,800
Answer: A
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