The capital budget will be supported with 30% debt and 70% equity. Since the company's income will be $825,000 this is the maximum equity that can be put towards the capital budget and therefor is matched in the ratio 70:30 by borrowings. If $825000 is 70%, divide that (825,000/.70) you’ll get the total maximum budget of $1,178,571 which is letter c. To get the 30%, just deduct the $825,000 to $1,178,571, you’ll get $353,571. To make sure your answer is correct, add up the 70% and 30% values and if they make the original total value, then the answer is correct. $825,000 + $353,571 = $1,178,571
