The capital budget forecast for the Santano Company is $725,000. The CFO wants to maintain a target capital structure of 45% debt and 55% equity, and it also wants to pay dividends of $625,000. If the company follows the residual dividend policy, how much income must it earn, and what will its dividend payout ratio be?

Select the correct answer.

a. NI = $1,023,750 Payout = 61.05%

b. NI = $1,023,430 Payout = 61.01%

c. NI = $1,022,470 Payout = 60.89%

d. NI = $1,022,790 Payout = 60.93%

e. NI = $1,023,110 Payout = 60.97%