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artcher [175]
1 year ago
11

The capital budget forecast for the Santano Company is $725,000. The CFO wants to maintain a target capital structure of 45% deb

t and 55% equity, and it also wants to pay dividends of $550,000. If the company follows the residual dividend policy, how much income must it earn, and what will its dividend payout ratio be?
Select the correct answer.

a. NI = $948,570

Payout = 57.93%
b. NI = $948,210

Payout = 57.85%
c. NI = $948,930

Payout = 58.01%
d. NI = $948,750

Payout = 57.97%
e. NI = $948,390

Payout = 57.89%
Business
1 answer:
postnew [5]1 year ago
8 0

According to the residual dividend policy, the net income comes out to be $948,750 with a dividend payout ratio of 57.97%.

<h3>What is the net income?</h3>

Net income is the value that is determined by deducting the charges from the revenues and can be inferred from the profit or loss statement prepared by the company at the year-end.

Given values:

Capital budget: $725,000

Equity ratio: 55%

Dividends: $550,000

<u>Step-1 </u>Computation of net income as per residual dividend policy:

\rm\ Net \rm\ Income=(\rm\ Capital \rm\ Budget \times\ \rm\ Equity \rm\ Ratio)+\rm\ Dividends\\\rm\ Net \rm\ Income=(\$725,000\times\55\%)+\$550,000\\\rm\ Net \rm\ Income=\$398,750+\$550,000\\\rm\ Net \rm\ Income=\$948,750

<u>Step-2 </u>Computation of dividend payout ratio:

\rm\ Dividend \rm\ Payout \rm\ Ratio=\frac{\rm\ Dividends}{\rm\ Net \rm\ Income} \\\rm\ Dividend \rm\ Payout \rm\ Ratio=\frac{\$550,000}{\$948,750} \\\rm\ Dividend \rm\ Payout \rm\ Ratio=57.97\%

Therefore, option D is the correct answer.

Learn more about the dividend payout ratio in the related link:

brainly.com/question/15871386

#SPJ1

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Answer:

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B. The government lowers tax rates and issues a partial refund of taxes that have already been paid, this statement is correct because when the government lowers tax rates it means that people have higher disposable income on their hands therefore they can spend more which increases demand, and people also invest more which increases supply, also refund of taxes will increase the disposable money that people have so they can invest and consume both which will increase both supply and demand.

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This is contraction fiscal policy and will do the opposite of expansionary fiscal policy, that is why this statement is incorrect.

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<u>Explanation:</u>

Data provided in the question:

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Therfore, rate of return = [ total return on the shares by purchase price ] into 100%

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A company manufactures three products, A, B, and C. The following information is available about the products on a per unit basi
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Answer:

Hi the demand for each  product for this question is missing, however, i have provided step by step approach to solving the problem below .

Explanation:

First Calculate the contribution per unit of each product

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Sales price                                  $65.50                $57.50                  $75.25

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Less Direct material cost            ($11.25)                ($8.90)                 ($22.75)

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<em>contribution per limiting factor = contribution per unit ÷ quantity per limiting factor per unit</em>

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Quantity of limiting factor             4.65                      6.3                          5.9

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<h3>What is vertical merger?</h3>

A vertical merger is the union of businesses that operate at various phases of the production process, such as raw materials, finished goods, and distribution. A merger between a steel manufacturer and an iron ore producer serves as an illustration.

Some characteristics of vertical merger are-

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