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The capital budget forecast for the Santano Company is $655,000. The CFO wants to maintain a target capital structure of 40% debt and 60% equity,
The capital budget forecast for the Santano Company is $655,000. The CFO wants to maintain a target capital structure of 40% debt and 60% equity, and the company is estimated to earn a net income of $400,000. a. If the company follows the residual dividend policy, how much cash dividend can be distributed? b. What will happen if the companys estimated net income decreases by 25% and the company follows the residual dividend policy strictly?
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