Sancorum Co. has a capital structure which consists of 50% debt, 30% common stock, and 20% preferred stock. The company has $1,000,000 of net income and pays out 40% of net income as a dividend. How large a capital budget can the company have without having to issue additional common stock or change its capital structure? $180,000 $200,000 $600,000 $1,200,000 $2,000,000

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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Sancorum Co. has a capital structure which consists of 50% debt, 30% common stock, and 20% preferred stock. The company has $1,000,000 of net income and pays out 40% of net income as a dividend. How large a capital budget can the company have without having to issue additional common stock or change its capital structure?

  1. $180,000
  2. $200,000
  3. $600,000
  4. $1,200,000
  5. $2,000,000

 

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