Fauver Industries plans to have a capital budget of $650,000. It wants to maintain a target capital structure of 40% debt and 60% equity, and it also wants to pay a dividend of $375,000. If the company follows the residual dividend policy, how much net income must it earn to meet its investment requirements, pay the dividend, and keep the capital structure in balance?
1. $895,050
2. $765,000
3. $787,950
4. $757,350
5. $627,300