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DeAngelo Corp. ' s projected net income is $ 1 5 0 . 0 million, its target capital structure is 2 5 % debt and
DeAngelo Corp.s projected net income is $ million, its target capital structure is debt and equity, and its target payout ratio is DeAngelo has more positive NPV projects than it can finance without issuing new stock, but its board of directors had decreed that it cannot issue any new shares in the foreseeable future. The CFO now wants to determine how the maximum capital budget would be affected by changes in capital structure policy andor the target dividend payout policy. Versus the current policy, how much larger could the capital budget be if the target debt ratio were raised to other things held constant, the target payout ratio were lowered to other things held constant, and the debt ratio and payout were both changed by the indicated amounts.
Increase in Capital Budget
Increase Debt to Lower Payout to Do Both
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