Jiji Co. has a target capital structure that consists of 40% debt, and 60% equity, the company is considering a project (capital budget) that costs $1,000,000 for the coming year. It is forecasting net income of $700,000.

Required: Use the above give to answer questions 9 through 14

9- If the company needs to expand its project, the dividend it can pay for shareholders is: *

$100,000

$300,000

$200,000

$225,300

None of the above

10- If the company needs to expand its project, then the dividend payout ratio is *

10.12%

10%

16.67%

16%

None of the above

11- If the company wants to maintain the same dividend payout ratio of last year which is 25%, the amount of dividends expected to be paid this year *

$700,000

$600,000

$225,000

$150,000

None of the above

12- The company is intending to expand its project that costs $1,000,000; keeping a Dividend payout ratio of 25%, then the amount of external equity needed is *

$100,000

$75,000

$0

$25,000

None of the above

13- If company decides to pay dividends same as the payout ratio of the last year of 25%; then the maximum capital that it can use for expanding its project is *

$875,000

$700,000

$600,000

$1,000,000

None of the above

14- Assume the company is thinking to expand a project with expected capital budget $1,125,000 and the company is able to issue maximum 1,200 shares each with a price $60. Regarding the dividends, the financial managers decided to payout 30%. Then how much should the company borrow to establish its project: *

$210,000

$287,000

$562,000

$563,000

None of the above