Badger Tool and Die Company Has 100,000 Shares Outstanding and Plans

Multiple Choice

Badger Tool and Die Company has 100,000 shares outstanding and plans to pay $1.00 per share in dividends each quarter next year. Badger has a capital budget of $700,000 for next year and plans to maintain its present debt ratio of 0.30. If earnings are expected to be $7.20 per share, how much external equity must Badger raise?

A) $210,000
B) $490,000
C) $170,000
D) None