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    Residual Dividend Policy Dividend and Payout Ratio

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    Fletcher Corp. has a capital budget of $1,000,000, but wants to maintain a target capital structure of 60% debt and 40% equity. The company forecasts this years net income to be $600,000. If the company does follow a residual dividend policy, what will be its dividend paid? What will be its dividend payout ratio?

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    Solution Preview

    The amount of retained earnings required is $400,000 (.40 x $1,000,000) ...

    Solution Summary

    A residual dividend policy is assessed, and dividend and payout ratio are calculated.