Lucky Mike’s, Inc. has a target debt-to-equity ratio of 0.8, after-tax earnings forecast of $1,200,000, and needs $1,350,000 for new investments. There are 800,000 shares outstanding. Compute its dividend payout ratio according to the residual dividend policy. Given that the current dividends per share is $0.75, use Lintner’s Partial Adjustment Model with an adjustment rate of 0.2 to compute the next period’s dividends per share.

Answer rating: 100% (QA)

step 1 Calculate the target equity level Target DebttoEquity Ratio 08 Equity Ratio 1 1 DebttoEqui... View the full answer