Carter Auto Tech has a capital budget of $900,000 and wants to maintain a target capital structure of 40% debt and 60% equity. The company expects to pay dividends of $200,000. If the company follows a residual dividend policy, what is its forecasted dividend payout ratio?

Carter Auto Tech has a capital budget of $900,000 and wants to maintain a target capital structure of 40% debt and 60% equity. The company expects to pay dividends of $200,000. If the company follows a residual dividend policy, what is its forecasted dividend payout ratio?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter15: Distributions To Shareholders: Dividends And Repurchases

Section: Chapter Questions

Problem 3MC: Assume that IWT has completed its IPO and has a $112.5 million capital budget planned for the coming...

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Question

What is the dividend payout ratio of this financial accounting question?

Carter Auto Tech has a capital budget of $900,000 and wants to
maintain a target capital structure of 40% debt and 60% equity. The
company expects to pay dividends of $200,000. If the company follows
a residual dividend policy, what is its forecasted dividend payout
ratio?

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