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MicroSemiSun System expects to have a net income of $800,000 during the next year. Its target and current capital structure is 40% debt and 60% common equity. The Director of Capital Budgeting has determined that the optimal capital budget for next year is $1.2 million. If strategic uses the residual dividend model to determine next year's dividend payout, what is the expected payout ratio?

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The solution explains how to calculate the payout ratio using residual dividend model.

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