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D. Paul Inc. forecasts a capital budget of $775,000. The CFO wants to maintain a target capital structure of 45% debt and 55% equity, and she also wants to pay a dividend of $650,000. If the company follows the residual dividend model, how much income must it earn, and what will its dividend payout ratio be? Group of answer choices $1,076,250; 60.39% $1,087,013; 59.80% $871,763; 74.56% $861,000; 75.49% $1,097,775; 59.21%

Respuesta :

Answer:

The correct option is the first one,$1,076,250; 60.39%

Explanation:

For the company to be able to pay $650,000 in dividends it must have recorded net income equals to  $650,000 plus 55% of capital budget(since equity contribution to the project is 55%).

This simply implies that equity contributed 55% of the capital funding but gets in return the amount invested plus the dividend payout.

Net income=$650,000+($775,000*55%)

                   =$650,000+$426250

                  =$ 1,076,250.00  

Dividend payout ratio=net income/dividends

net income is  1,076,250.00  

dividends is 650,000

dividend payout ratio=650,000/ 1,076,250.00  =60.39%