Explore BrainMass
Share

Explore BrainMass

    Residual Dividend Policy

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Ting Technology has a capital budget of $850,000, it wants to maintain a target capital structure of 35% debt and 65% equity, and it also wants to pay a dividend of $400,000. If the company follows a residual dividend policy, how much net income must it earn to meet its capital budgeting requirements and pay the dividend, all while keeping its capital structure in balance?

    A. $904,875
    B. $952,500
    C. $1,000,125
    D. $1,050,131
    E. $1,102,638

    © BrainMass Inc. brainmass.com October 9, 2019, 8:14 pm ad1c9bdddf
    https://brainmass.com/business/dividends-stock-repurchase-and-policy/residual-dividend-policy-143908

    Solution Summary

    The solution explains how to calculate the net income that should be earned under the residual dividend policy.

    $2.19