Paul Inc. forecasts a capital budget of $725,000. The CFO wants to maintain a target capital structure

Question:

Paul Inc. forecasts a capital budget of $725,000. The CFO wants to maintain a target capital structure of 45% debt and 55% equity, so wants to pay dividends of $500,000. If the company follows the residual dividend policy, how much income must it earn, t will its dividend payout ratio be?

A. Net Income: $898,750

Payout 55.63%

B. Net Income: $943,688

Payout 58.41%

C. Net Income: $990,872

Payout 6134%

D. Net Income: $1,040,415

Payout 64A0%

E. Net Income: $1,092,436

Payout 67.62%

Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...