Forte Papers Corporation and Great Southern Paper Company are in the same industry, both are publicly held with a large number of stockholders, and they have the following characteristics (in thousands):

Forte Great Southern Expected annual cash flow $ 50,000 $35,000 Standard deviation of cash flow 30,000 25,000 Annual capital expendituses 42,000 40,000 Cash and marketable securities 5,000 7,000 Existing long-term debt 100,000 85,000 Unused short-term lime of credit 25,000 10,000 Flotation costs and underpricing on common-stock issues as a percent of proceeds .05 .08 On the basis of this information, which company is likely to have the higher dividend-payout ratio? Why?

r.nJ &Solut ions to Self-correction Problems