4. Dentaltech Inc. projects the following data for the coming year. If the firm follows the residual dividend model and also maintains its target capital structure, what will its dividend payout ratio be? $2,900,000 Capital budget 10% % Debt EBIT $1,025,000 Interest rate 40% Debt outstanding Shares outstanding $5,100,000 % Equity 5,000,000 Tax rate 60% 40% a. 70.8% b. 50.8% c. 57.1% d. 71.4% e. 65.7%

Financial Management: Theory & Practice
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Chapter7: Corporate Valuation And Stock Valuation
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4. Dentaltech Inc. projects the following data for the coming year. If the firm follows the residual dividend model and also
maintains its target capital structure, what will its dividend payout ratio be?
$2,900,000 Capital budget
10% % Debt
EBIT
$1,025,000
Interest rate
40%
Debt outstanding
Shares outstanding
$5,100,000 % Equity
5,000,000 Tax rate
60%
40%
a. 70.8%
b. 50.8%
c. 57.1%
d. 71.4%
e. 65.7%
Transcribed Image Text:4. Dentaltech Inc. projects the following data for the coming year. If the firm follows the residual dividend model and also maintains its target capital structure, what will its dividend payout ratio be? $2,900,000 Capital budget 10% % Debt EBIT $1,025,000 Interest rate 40% Debt outstanding Shares outstanding $5,100,000 % Equity 5,000,000 Tax rate 60% 40% a. 70.8% b. 50.8% c. 57.1% d. 71.4% e. 65.7%
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