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.