Use residual dividend policy to determine annual dividends

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Suppose that Metrick, Inc. has a capital budget for the upcoming year of $100 million and it expects net income of $80 million. The company’s optimal capital structure is 40% debt and 60% equity. If Metrick follows a residual dividend policy, what will its total dividend be for the year? Why would Metrick not be likely to use a residual dividend policy to determine annual dividends?

Reference no: EM13914609

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