Petersen Company has a capital budget of $1.2 million. The company wants to maintain a target capital structure which is 70% debt and 30% equity. The company forecasts that its net income this year will be $800,000. If the company follows a residual distribution model and pays all distributions as dividends, what will be its payout ratio?

Petersen Company has a capital budget of $1.2 million. The company wants to maintain a target capital structure which is 70% debt and 30% equity. The company forecasts that its net income this year will be $800,000. If the company follows a residual distribution model and pays all distributions as dividends, what will be its payout ratio?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter15: Distributions To Shareholders: Dividends And Repurchases

Section: Chapter Questions

Problem 2P

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