Wolfpack Multimedia Follows a Strict Residual Distribution Policy (With All

question 26

Multiple Choice

Wolfpack Multimedia follows a strict residual distribution policy (with all distributions in the form of dividends) . Wolfpack forecasts that its net income will be $12 million this year. The company has no depreciation expense so its net cash flow is $12 million, and its target capital structure consists of 70 percent equity and 30 percent debt. Wolfpack's capital budget is $10 million. What is the company's dividend payout ratio?

• A) 16.67%
• B) 41.67%
• C) 11.67%
• D) 0.00%
• E) 58.30%

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