Hello, kindly help me solve this problem about the Distribution to shareholders: Residual distribution policy.

Petersen Company has a capital budget of $ 1.2 million. You want to maintain an optimal capital structure with 60% debt and 40% equity. According to their forecasts, the net profit for the current year will be $600,000. What will be your reason for paying dividends if you apply a residual distribution model and if you pay all distributions with dividends?

Reference book:

Corporate Finance: A Focused Approach by Ehrhardt and Brigham Second Edition

Thanks!