Grandin Inc. is evaluating its dividend policy. It has a capital budget of $625,000, and it wants to maintain a target capital structure of 60% debt and 40% equity. The company forecasts a net income of $675,000. If it follows the residual dividend policy, what is its forecasted dividend payout ratio?

Select the correct answer.

a. 65.44%

b. 66.68%

c. 64.20%

d. 62.96%

e. 61.72%