Problem 17-2 Residual Distribution Policy

Petersen Company has a capital budget of $1.0 million. The company wants to maintain a target capital structure which is 60% debt and 40% equity. The company forecasts that its net income this year will be $700,000. If the company follows a residual distribution model and pays all distributions as dividends, what will be its payout ratio? Round your answer to two decimal places.

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