Rutland Corporation has declared an annual dividend of $0.50 per share. For the year just ended, earnings

Question:

Rutland Corporation has declared an annual dividend of $0.50 per share. For the year just ended, earnings were $8 per share.

a. What is Rutland’s payout ratio?

b. Suppose Rutland has seven million shares outstanding. Borrowing for the coming year is planned at $14 million. What are planned investment outlays assuming a residual dividend policy? What target capital structure is implicit in these calculations?

Capital Structure
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