Computing dividend pay-out ratio and the company forecasts, Ask an Expert

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Computing dividend pay-out ratio

Ronaldo Inc. has a capital budget of $1,000,000, but it wants to maintain a target capital structure of 60% debt and 40% equity. The company forecasts this year's net income to be $600,000. If the company follows a residual dividend policy, what will be its dividend pay-out ratio?

a. 16.67%

b. 20.00%

c. 25.00%

d. 33.33%

e. 35.00%

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