Question

Asked Dec 3, 2019

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Question C in part 2

Step 1

**Part 1:**

Residual Dividend Model refers to a method that a firm uses to calculate the dividend it would pay to the stockholders. In this method, a firm decides which new project it will finance and after allocating funds to the project, it distributes the remaining profit to the stockholders in the form of dividends.

Step 2

Given that SSC has $800000 capital budget amount for coming year.

Optimal capital structure is 70% equity and 30% debt, it means that the company needs to maintain an equity to debt ratio of 70:30

Now, when the company maintains an equity to debt ratio of 70:30;

Step 3

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