Alexanders company CFO has provided the following information:

The companys capital budget is expected to be $5,000,000. The companys current capital structure is 40% Debt and 60% equity The companys target capital structure is 70 percent debt and 30 percent equity. The companys net income is $4,500,000.

If the company follows a residual distribution policy (with all distributions in the form of dividends), what portion of its net income should it pay out as dividends this year?

Note: Solve in word file