Rocketdyne is planning its cash distribution policy.

Company analysts have forecast the following: 75% Target equity ratio for capital structure, 120 Capital budget for upcoming investment opportunities, and 80 Net income forecast

Additional company information: 80 million shares outstanding, Using the residual distribution model,

Questions:

1a) What is Rocketdyne's planned distribution based on the forecast? (think carefully about this)

1b) What does your answer for a) tell you about the firm's investment opportunities and/or capital structure target?