Stargell Industries Follows a Strict Residual Dividend Policy

question 54

Multiple Choice

Stargell Industries follows a strict residual dividend policy.The company has a capital budget of $3,000,000.It has a target capital structure which consists of 30 percent debt and 70 percent equity.The company forecasts that its net income will be $3,500,000.What will be the company's payout ratio this year?

• A) 25%
• B) 30%
• C) 35%
• D) 40%
• E) 45%

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