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 th firm, and the availability and cost of external capital. The firm makes distributions based on the residual earning Consider the case of Purple Hedgehog Forestry Group: Purple Hedgehog Forestry Group is expected to generate $140,000,000 in net income over the next year. Purple Hedgehog Forestry's stockholders expect it to Equity maintain its long-run dividend payout ratio of 30% of earnings. If the firm wants to maintain its current capital structure of 60% debt and 40% equity, the maximum capital budget it can support this year's expected net income is____ If Purple Hedgehog Forestry increases its debt ratio, then its dividend payout ratio will ____, assuming that all other factors are held constant. 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 is most accurate? Most firms can still use the concepts behind a residual dividend policy to make long-run decisions about dividends A residual dividend policy can't be of any help to most firms