I need answer of this question solution general accounting ABC Corp has a capital budget of $900,000. The firm's targetcapital structure is 70% debt. The company is forecasting a netincome this year of $400,000. Following the residualdistribution model and paying all distributions as dividends, thepayout ratio will be:A. 15%B. 25%C. 32.5%D. 40%

Step 1: Definition of Residual Distribution ModelThe residual distribution model calculates…

Answered: ABC Corp has a capital budget of…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter13: Capital Structure Concepts

Section: Chapter Questions

Problem 6P

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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%