Brock Brothers Wants to Maintain Its Capital Structure That Is

Multiple Choice

Brock Brothers wants to maintain its capital structure that is 30 percent debt, and 70 percent equity. The company forecasts that its net income this year will be $1,000,000. The company follows a residual distribution policy (with all distributions in the form of dividends) , and anticipates a dividend payout ratio of 40 percent. What is the size of the company's capital budget?

A) $ 600,000
B) $ 857,143
C) $1,000,000
D) $1,428,571
E) $2,000,000