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Combinations of variables-santano company

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The capital budget forecast for the Santano Company is $725,000. The CFO wants to maintain a target capital structure of 45% debt and 55% equity, and it also wants to pay dividends of $500,000. If the company follows the residual dividend policy, how much income must it earn, and what will its dividend payout ratio be?

Notes: With some combinations of variables, the residual policy may result in zero dividends and a zero payout ratio. These outcomes are noted in the topic [TOP] field if applicable.

Net Income Payout

a. $898,750 55.63%

b. $990,872 61.34%

c. $1,040,415 64.40%

d. $943,688 58.41%

e. $1,092,436 67.62%

Reference no: EM132481742

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