2B6M MASON INC. IS CONSIDERING FOUR ALTERNATIVE OPPORTUNITIES. REQUIR...
188.
CSO: 2B6f
LOS:2B6m
Mason Inc. is considering four alternative opportunities. Required investment outlays
and expected rates of return for these investments are given below.
Project
Investment Cost
IRR
A
$200,000
12.5
B
$350,000
14.2
C
$570,000
16.5
D
$390,000
10.6
The investments will be financed through 40% debt and 60% common equity. Internally
generated funds totaling $1,000,000 are available for reinvestment. If the cost of capital
is 11%, and Mason strictly follows the residual dividend policy, how much in dividends
would the company likely pay?
a.
$120,000.
b.
$328,000.
c.
$430,000.
d.
$650,000.