Plato Inc Expects to Have Net Income of $5,000,000 During the the Next

question 19

Multiple Choice

Plato Inc. expects to have net income of $5,000,000 during the next year. Plato's target capital structure is 35 percent debt and 65 percent equity. The company's director of capital budgeting has determined that the optimal capital budget for the coming year is $6,000,000. If Plato follows a residual distribution policy (with all distributions in the form of dividends) to determine the coming year's dividend, then what is Plato's payout ratio?

• A) 38%
• B) 42%
• C) 58%
• D) 33%
• E) None of the answers above is correct.

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Definitions:

Freudian Theory

A set of psychoanalytic theories proposed by Sigmund Freud that center on unconscious motives, conflicts, and childhood experiences influencing behavior.

Conflict

A situation or process where individuals, groups, or interests are in opposition, leading to disagreements or disputes.

Self-actualization

The realization or fulfillment of one’s talents and potentialities, considered as a drive or need present in everyone.

Impulses

Sudden desires or urges that can lead an individual to act without forethought, often based on immediate emotional responses.