Capital structure in balance

Reference no: EM13139606

Fauver Worldwide forecasts a capital budget of $650,000, and it wants to maintain a target capital structure of 40% debt and 60% equity. It also wants to pay a dividend of $225,000. If the company follows the residual dividend policy, how much net income must it earn to meet its capital requirements, pay the dividend, and keep the capital structure in balance?

1) $584,250

2) $615,000

3) $645,750

4) $678,038

5) $711,939

Reference no: EM13139606

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