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How much will be added to retained earnings

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Reference no: EM132406440

Reed Corporation has a capital budget of $2.25 million. The company wants to maintain a target capital structure which is 60% debt and 40% equity. The company forecasts that its net income this year will be $800,000.

1. If the firm uses a payout ratio of 25%, what dividend will Reed pay?

2. How much will be added to retained earnings?

3. If the company wishes to maintain its debt-equity ratio to finance the capital budget, how much debt must the firm issue?

4. How much equity must the firm issue?

Reference no: EM132406440

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