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

80 Net income forecast

Additional company information:

80 Shares outstanding, millions

Using the residual distribution model,

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

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