D. Paul Inc. forecasts a capital budget of $725,000. The CFO wants to maintain a

Question

D. Paul Inc. forecasts a capital budget of $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: $898,750

Payout: 55.63%

Net Income: $943,688

Payout: 58.41%

Net Income: $990,872

Payout: 61.34%

Net Income: $1,040,415

Payout: 64.40%

Net Income: $1,092,436

Payout: 67.62%

D. Paul Inc. forecasts a capital budget of $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: $898,750

Payout: 55.63%

Net Income: $943,688

Payout: 58.41%

Net Income: $990,872

Payout: 61.34%

Net Income: $1,040,415

Payout: 64.40%

Net Income: $1,092,436

Payout: 67.62%

Explanation / Answer

45% Debt 326250 55% Equity 398750 Dividend Payout 500000 Net Income 898750 Payout 55.63%

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