Question
The board of directors of the company has asked for expected capital budgeting and the residual dividend payouts for the next year. The best planned
The board of directors of the company has asked for expected capital budgeting and the residual dividend payouts for the next year. The best planned capital investment appears to require a capital budget of $5,000,000, while available retained earnings are forecast to be $3,000,000. The policy for capital structure is 45% debt and 55% equity.
(A)Determine the apparent dividend payout ratio and amount of potential dividends.
(B)Under a residual dividend policy, what is the relationship between the amount of capital investments undertaken and the dividends paid?
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