The residual dividend 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 availobality and cost of external copital. The firm makes distributions based on the residual earnings. Consider the case of Red Bison Petroleum Producers Group: Red Bison Petroleum Producers Group is expected to generate 5240,000,000 in net income over the next year. Red Bison Petroleum Producers Group has forecasted a capital budget of 583,000,000, and it wishes to maintain its current capital structure of 70% debt and 30% equity. If the compeny follows a strict residual dividend policy and makes distributions in the form of dividends, what is its expected dividend payout ratio for thes year? 62.74%98.59%89.63%85.15% It Red Buson Petroleum Producers Group reduces the amount of its forecasted capital budget, how will this affect the firm's annual dividend, assuming that all other factors are held constant? The amount that Red Bison Petroleum Producers Group will pay out in dividends this year will increase: The amount that Red Bison Petroleum Producers Group will pay out in dividends this year will decrease. Most firms have earnings that vary considerably from year to year and do not grow at a reliably constant pace. Furthermore, their required investment may change often. Which of these statements is the most accurate? Most firms con stil use the concepts behind o residual dividend policy to make long-run decisions about dividends. A residual dividend policy cant be of any neip to most firms