Pete and Repete, a litter recycling company, uses a residual dividend policy. A debt-equity ratio of 1.20

Question:

Pete and Repete, a litter recycling company, uses a residual dividend policy. A debt-equity ratio of 1.20 is considered optimal. Earnings for the period just ended were $3,800, and a dividend of $425 was declared. How much in new debt was borrowed? What were total capital outlays?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...