A Firm's Correctly Computed Capital Structure Is 30% Debt, 20

Multiple Choice

A firm's correctly computed capital structure is 30% debt, 20% preferred stock, and 50% equity. If retained earnings of $1 million are expected, how much capital will have been raised when retained earnings are exhausted and new common equity must be issued?

A) $1,428,571
B) $1,000,000
C) $2,000,000
D) $3,333,333