In order to get rich you have started your own business college which you have named BCU (Big Cashflow University). It is very successful because no classes start before 10:00 in the morning, there is a swimming pool and bar in the business building, and there are no exams. You will issue bonds to raise 50% of your future capital at a pre-tax cost of 9%. 10% of your capital will come from preferred stock that will cost 11%. 40 % of your capital will come from equity which you estimate will cost 15% at the current stock price of $25 per share. You personally own 100 shares of stock in your company. Your company has $800,000 of internally generated funds and has identified $1,000,000 of profitable projects. If your company uses a “residual model” for dividend payment, calculate the total amount you can pay out as cash dividends?
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