First blank options:

a) 252,000,000 b) 238,000,000 c) 280,000,000 d) 266,000,000

Second blank options:

a) decrease b) increase

The residual dividend policy approach to dividend policy is based on the theory that a firm's optimal dividend distribution policy is a function of the firm's target capital structure, the investment opportunities available to the firm, and the availability and cost of external capital. The firm makes distributions based on the residual earnings. Consider the case of Purple Hedgehog Forestry Group Purple Hedgehog Forestry Group is expected to generate $140,000,000 in net income over the next year. Purple Hedgehog Forestry Group's stockholders expect it to maintain its long-run dividend payout ratio of 20% of earnings. If the firm wants to maintain its current capital structure of 60% debt and 40% equity, the maximum capital budget it can support with this year's expected net income is If Purple Hedgehog Forestry Group increases its debt ratio, then its dividend payout ratio will, assuming that all other factors are held constant. may change often. Which of these statements is the most accurate? Most firms can still use the concepts behind a residual dividend policy to make long-run decisions about dividends. A residual dividend policy can't be of any help to most firms