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What will the payout ratio be for silvana inc

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Problem 1: Silvana Inc. projects the following data for the coming year. If the firm follows the residual dividend policy and also maintains its target capital structure, what will its payout ratio be?

EBIT $2,000,000
Capital budget $850,000
Interest rate 10%
Debt 40%
Debt outstanding $5,000,000
Equity 60%
Shares outstanding $5,000,000
Tax rate 25%

a. 49.3%
b. 57.4%
c. 51.9%
d. 46.9%
e. 54.7%

Reference no: EM132985155

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