The Clydesdale Corporation has an optimal capital structure consisting of 70 percent debt and 30 percent equity The marginal cost of capital is calculated to be 14 75 percent Total earnings available to common stockholders for the coming year total $1,200,000 Investment opportunities are Project Investment IRR ( ) A $1,000,000 22 B $750,000 18 C $1,250,000 15 D $500,000 14 a According to the residual dividend theory, what should the firm's total dividend payment be b If the firm paid a total dividend of $675,000, and restricted equity financing to internally generated funds, which projects should be selected Assume the marginal cost of capital is constant

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The Clydesdale Corporation has an optimal capital structure consisting of 70 percent debt and 30 percent equity. The marginal cost of capital is calculated to

The Clydesdale Corporation has an optimal capital structure consisting of 70 percent debt and 30 percent equity. The marginal cost of capital is calculated to be 14.75 percent. Total earnings available to common stockholders for the coming year total $1,200,000. Investment opportunities are:

Project	Investment	IRR (%)
A	$1,000,000	22
B	$750,000	18
C	$1,250,000	15
D	$500,000	14

a. According to the residual dividend theory, what should the firm's total dividend payment be?

b. If the firm paid a total dividend of $675,000, and restricted equity financing to internally generated funds, which projects should be selected? Assume the marginal cost of capital is constant.