Bachelor’s Bus Co. uses the residual dividend model to determine its common dividend payout. This year the company expects its net profit to be P2 million, and it expects to have a 25 percent common dividend payout ratio. The company’s target debt ratio is 40 percent, and the firm is financed with only common equity and debt. What is the company’s forecasted total capital budget for the year?
Bachelor’s Bus Co. uses the residual dividend model to determine its common dividend payout. This year the company expects its net profit to be P2 million, and it expects to have a 25 percent common dividend payout ratio. The company’s target debt ratio is 40 percent, and the firm is financed with only common equity and debt. What is the company’s forecasted total capital budget for the year?
Chapter15: Dividend Policy
Section: Chapter Questions
Problem 4P
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4
Bachelor’s Bus Co. uses the residual dividend model to determine its common dividend payout. This year the company expects its net profit to be P2 million, and it expects to have a 25 percent common dividend payout ratio. The company’s target debt ratio is 40 percent, and the firm is financed with only common equity and debt. What is the company’s forecasted total capital budget for the year?
Group of answer choices
P3.75 million
P3.33 million
P1.25 million
P2.50 million
P2.25 million
P5.00 million
P3.25 million
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