Question
Using the residual dividend approach, calculate the implied payout ratio of Apex Corp. if it has a target debt-to-equity of 40/60, its capital budget for
Using the residual dividend approach, calculate the implied payout ratio of Apex Corp. if it has a target debt-to-equity of 40/60, its capital budget for next year is estimated at $40 million, and estimated net income is $30 million. (Show Work)
| Target Cap Structure |
|
|---|---|
| Debt | 40% |
| Equity | 60% |
| Earnings | 30,000,000 |
| Capital spending | 40,000,000 |
| Financed from new debt | 16,000,000 |
| Financed from R.E. | 24,000,000 |
| Financed from new equity/debt | 0 |
| Apex Corp. Dividend | 6,000,000 |
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Financial Institutions Management A Risk Management Approach
Authors: Anthony Saunders, Marcia Millon Cornett
9th edition
1259717771, 1259717772, 9781260048186, 1260048187, 978-1259717772
