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Question
The capital budget forecast for the Santano Company is $725,000. The CFO wants to maintain a target capital structure of 45% debt and 55% equity, and it also wants to pay dividends of $500,000. If the company follows the residual dividend policy, how much income must it earn, and what will its dividend payout ratio be?Net Income Payout
a. $ 898,750 55.63%
b. $ 943,688 58.41%
c. $ 990,872 61.34%
d. $1,040,415 64.40%
e. $1,092,436 67.62%
Answer
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