Question
Part 2. Using the residual dividend model. AR Tech Inc. projects the following data for the coming year. EBIT $2,000,000 Capital budget $850,000 Interest rate
Part 2. Using the residual dividend model. AR Tech Inc. projects the following data for the coming year. EBIT $2,000,000 Capital budget $850,000 Interest rate 10% % Debt 40% Debt outstanding $5,000,000 % Equity 60% Shares outstanding 5,000,000 Tax rate 30% Assume the company follows the residual dividend policy and also maintains its target capital structure. Question 1: Determine net income for AR Tech. Check figure: net income = $1,050,000. Question 2: Determine how much equity is needed for the capital budget. Question 3: What is AR Tech's payout ratio? Hint: First calculate how much in dividends the company will pay.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started