The Wei Corporation expects next year's net income to be $16 million. The firm's debt ratio is currently 45%. Wei has $12 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?
The Wei Corporation expects next year's net income to be $16 million. The firm's debt ratio is currently 45%. Wei has $12 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?
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter7: Corporate Valuation And Stock Valuation
Section: Chapter Questions
Problem 1P: Ogier Incorporated currently has $800 million in sales, which are projected to grow by 10% in Year 1...
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Transcribed Image Text:The Wei Corporation expects next year's net income
to be $16 million. The firm's debt ratio is currently
45%. Wei has $12 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?
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