Get accurate answer this financial accounting question Velocity Auto Corp. has a capital budget of $1,500,000 andaims to maintain a target capital structure of 60% debtand 40% equity. The company plans to pay a dividend of$300,000.If Velocity Auto Corp. follows a residual dividend policy,what is its forecasted dividend payout ratio?

Step 1: Definition of Residual Dividend Policy Residual Dividend Policy is a method where dividends…

Answered: Velocity Auto Corp. has a capital…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 11P

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Velocity Auto Corp. has a capital budget of $1,500,000 and aims to maintain a target capital structure of 60% debt and 40% equity. The company plans to pay a dividend of $300,000. If Velocity Auto Corp. follows a residual dividend policy, what is its forecasted dividend payout ratio?