Grandin Inc

question 41

Multiple Choice

Grandin Inc.is evaluating its dividend policy.It has a capital budget of $625,000, and it wants to maintain a target capital structure of 60% debt and 40% equity.The company forecasts a net income of $475,000.If it follows the residual dividend policy, what is its forecasted dividend payout ratio?

• A) 40.61%
• B) 42.75%
• C) 45.00%
• D) 47.37%
• E) 49.74%

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Definitions:

Record

A document or entity that preserves information or data for future reference.

Law of Averages

A layman's term often misused to suggest that a future event is likely to occur to balance out a statistical deviation, though not a formal statistical principle.

Independent Events

Two or more events whose outcomes do not affect each other's probabilities of occurring.

Positive Difference

The result of subtracting a smaller number from a larger number, ensuring a non-negative result.