Assume that IWT has a $$112\mathrm{.}5$ million capital budget planned for the coming year. You have determined its present capital structure $(80\%$ equity and $20\%$ debt$)$ is optimal, and its net income is forecasted at $$140$ million. Use the residual distribution model approach to determine IWT$$s total dollar distribution. Assume for now that the distribution is in the form of a dividend. IWT has $100$ million shares. What is the forecasted dividend payout ratio? What is the forecasted dividend per share? Show Work.

What would happen to the payout ratio and DPS if net income were forecasted to decrease to $$90$ million?

What would happen to the payout ratio and DPS if net income were forecasted to increase to $$160$ million?