firm in the IT sector is considering how to set its dividend policy. It has a capital budget of €3,000. The company wants to maintain a target capital structure that is 15% debt and 85% equity. The company forecasts that its net income this year will be €3,500. If the company follows a residual dividend policy, what will be its total dividend payment and its payout ratio?
firm in the IT sector is considering how to set its dividend policy. It has a capital budget of €3,000. The company wants to maintain a target capital structure that is 15% debt and 85% equity. The company forecasts that its net income this year will be €3,500. If the company follows a residual dividend policy, what will be its total dividend payment and its payout ratio?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A firm in the IT sector is considering how to set its dividend policy. It has a capital budget of €3,000. The company wants to maintain a target capital structure that is 15% debt and 85% equity. The company
Dividends = Net income – [(target equity ratio) *(total capital budget)].
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