ABC Corp has a capital budget of $900,000. The firm's target capital structure is 70% debt. The company is forecasting a net income this year of $400,000. Following the residual distribution model and paying all distributions as dividends, the payout ratio will be: A. 15% B. 25% C. 32.5% D. 40%

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter13: Capital Structure Concepts
Section: Chapter Questions
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ABC Corp has a capital budget of $900,000. The firm's target
capital structure is 70% debt. The company is forecasting a net
income this year of $400,000. Following the residual
distribution model and paying all distributions as dividends, the
payout ratio will be:
A. 15%
B. 25%
C. 32.5%
D. 40%
Transcribed Image Text:ABC Corp has a capital budget of $900,000. The firm's target capital structure is 70% debt. The company is forecasting a net income this year of $400,000. Following the residual distribution model and paying all distributions as dividends, the payout ratio will be: A. 15% B. 25% C. 32.5% D. 40%
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