CMA Study Group

26) Mason Inc. is considering four alternative opportunities.  Required investment outlays and expected rates of return for these investments are given below.

Project             Investment Cost               IRR

     A                       $200,000                   12.5

     B                       $350,000                   14.2

     C                       $570,000                   16.5

     D                       $390,000                   10.6

The investments will be financed through 40% debt and 60% common equity.  Internally generated funds totaling $1,000,000 are available for reinvestment.  If the cost of capital is 11%, and Mason strictly follows the residual dividend policy, how much in dividends would the company likely pay?

a. $120,000.

b. $328,000.

c. $430,000.

d. $650,000.

Befor i solve this problem plz pray for me to fined a job ..... waiting

after you prayed for me to fines a job ............. let us begin to think together to find out this problem

plz do not use calculator ......... ok !!

i speake a lot that is riight ????

the correct answer is ????? the answer is B 

how i get this answer

the company can choose more than project to carry it out

ok !

ok .. the budget for investment from common equity is 60% ok !

what is the base that we will choose the accepted projects by it ?

IRR> cost of capital

so we will choose three project A,B,and C   so we need 200+350+570 = $1120

this amout will be financed by 60% equity = 1120*60%= $672

and we have $1000 000 so the 1000000-672000= $328000 the rest that will be distributed to the stockholders as devs

 

if u need more exeplanation plz inform

do not pray for me to fined a job

I wonder that why we choose 3 investment instead of only 1? (the subject give us the "4 alternative opportunities"-->choose best option among 4 options in the same case)

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Bao Nguyen Quoc
Student
Ho Chi Minh
Viet Nam
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Original Message:
Sent: 12-07-2010 02:59 AM
From: Mohamed Elsayed Abd Elrady
Subject: Re: Need Help Part 3 plz

Befor i solve this problem plz pray for me to fined a job ..... waiting

after you prayed for me to fines a job ............. let us begin to think together to find out this problem

plz do not use calculator ......... ok !!

i speake a lot that is riight ????

the correct answer is ????? the answer is B 

how i get this answer

the company can choose more than project to carry it out

ok !

ok .. the budget for investment from common equity is 60% ok !

what is the base that we will choose the accepted projects by it ?

IRR> cost of capital

so we will choose three project A,B,and C   so we need 200+350+570 = $1120

this amout will be financed by 60% equity = 1120*60%= $672

and we have $1000 000 so the 1000000-672000= $328000 the rest that will be distributed to the stockholders as devs

 

if u need more exeplanation plz inform

do not pray for me to fined a job

I really appreciate the help. Thank you Mohamed and Hussein. 

Dont worry Mohamed you will find a job soon. I will pray for sure. Good luck for your Job.