The residual distribution policy approach to dividend policy is based on the theory that a firm's optimal dividend distribution policy is a function of the firm's target capital structure, the investment opportunities available to the firm, and the availability and cost of external capital. The firm makes distributions based on the residual earnings. Consider the case of Yellow Duck Distribution Corporation: 30% Equity 70% Debt Yellow Duck Distribution Corporation is expected to generate $180,000,000 in net income over the next year. Yellow Duck Distribution has forecasted a capital budget of $86,000,000, and it wishes to maintain its current capital structure of 70% debt and 30% equity. If the company follows a strict residual distribution policy and makes distributions in the form of dividends, what is its expected dividend payout ratio for this year? O 68.54% O 85.67% O 89.95% O 81.39% Yellow Duck Distribution is considering using more equity and less debt in its capital structure. Which of these statements best describes how this will affect the firm's annual dividend, assuming that all other factors are held constant? O Yellow Duck Distribution will pay a smaller annual dividend if it goes forward with this decision. Yellow Duck Distribution's annual dividend will be greater if it goes forward with this decision. What kind of company is most likely to follow a strict residual distribution policy? O A firm with stable, predictable earnings and investment O A firm whose investment needs change often O All companies O A firm whose earnings are cyclical and follow the economy Gaven Industries, which is in the same sector as Yellow Duck Distribution, exhibits very stable and predictable earnings, but its capital investments tend to be lumpy. This means that Gaven's required capital investment spending is usually relatively low, but every few years, some sizable expenditures will cause the firm's capital budget to be quite large. Should Gaven Industries be following a strict residual distribution policy? O Yes O No