(a) ABC Company has a target capital structure that consists of 60 percent debt and 40 percent equity. The company anticipates that its capital budget for next year will be $2 million. What is the companys dividend payout ratio, assuming that the company reports net income of $1.5 million and it follows a residual dividend payout policy?

(b) A company sells on terms of 3/10, net 30. Total sales for the year are $949,000. On average, fifty percent of the customers pay on the 10^th day and the rest pay on the 40^th day. Based on the information given, what is the average amount of receivables? What would happen to average receivables if the company toughened up on its collection policy with the result that all nondiscount customers paid on the 30^th day?

(c) XYZ Company produces a product that sells for $100,000 each. The companys fixed costs are $2 million; 50 products are produced and sold each year; profits total $500,000; and the companys assets (all equity financed) are $5 million. The company estimates that it can change its production process, adding $4 million to investment and $500,000 to fixed operating costs. The change will reduce variable costs per unit by $10,000 and increase output by 20 units. However, the sales price on all units will have to be lowered to $95,000 to permit sales of the additional output. Assume that the company has no debt, its cost of equity is 15 percent and there is no corporate tax, should the company make the change?