14.2 - If the company follows a residual distribution...

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14-2 Petersen Co. has a capital budget of $1,200,000. The company wants to maintain a target capital structure that is 60 percent debt and 40 percent equity. The company forecasts that its net income this year will be $600,000.
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Unformatted text preview: If the company follows a residual distribution policy (with all distributions in the form of dividends), what will be its payout ratio? $1,200,000(.40) = $480,000 Payout ratio $120,000/$600,000 = 20%...
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