A company follows a strict residual dividend policy. It has a capital budget of

Question

A company follows a strict residual dividend policy. It has a capital budget of $3,000,000 and a target capital structure that consists of 30% debt and 70% equity. Net income is forecast to be 3.5mil. Calculate the expected dividend payout amount. Select one a. $1,400,000 b. $2,100,000 c, $3,000,000 d. $900,000 e. $2,450,000 Queshion 5 Not yet answered Points out of 10 Flsg question A fim has 12 million common shares outstanding, currently trading at $120 per share for a total market value of $1.44 billion. They plan to split thoir stock 5-for-3. Calculato the number of shares that will be outstanding and the share price after the split 7:41 PM 6/13/2018 F10 F11 F12 PrtSer Insert Delete F8 F9 Bacdkopaca 7 8 9

Explanation / Answer

Expected dividend payout amount=Net income-(Capital budget*Weight of equity)

which is equal to

=$3,500,000-(3,000,000*0.7)

which is equal to

=$1,400,000

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