What will be dividend payout ratio

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Reference no: EM131342629

(1) Puckett Products is planning for $2.5 million in capital expenditures next year. Puckett's target capital structure consists of 60% debt and 40% equity. If net income next year is $1 million and Puckett follows a residual distribution policy with all distributions as dividends, what will be its dividend payout ratio? Round your answer to two decimal places.

(2) The Wei Corporation expects next year's net income to be $10 million. The firm's debt ratio is currently 55%. Wei has $9 million of profitable investment opportunities, and it wishes to maintain its existing debt ratio. According to the residual distribution model (assuming all payments are in the form of dividends), how large should Wei's dividend payout ratio be next year? Round your answer to two decimal places.

Reference no: EM131342629

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