Question: Computer Inc. projects the following data for the coming year. If the firm follows the residual dividend model and also maintains its target capital structure,

Computer Inc. projects the following data for the coming year. If the firm follows the residual dividend model and also maintains its target capital structure, what will its dividend payout ratio be?

EBIT $2,000,000 Capital budget $825,000

Interest rate 12% % Debt 45%

Debt outstanding $5,000,000 % Equity 55%

Shares outstanding 5,000,000 Tax rate 25%

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