Q17

Dentaltech Inc. projects the following data for the coming year. If the firm follows the residual dividend policy and also maintains its target capital structure, what will its payout ratio be?

Data Table

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	40%

Select one:

a. 41.2%

b. 37.2%

c. 39.1%

d. 45.5%

e. 43.3%