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Determine the apparent dividend payout ratio

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The board of directors of the company has asked for expected capital budgeting and the residual dividend payouts for the next year. The best planned capital investment appears to require a capital budget of $5,000,000, while available retained earnings are forecast to be $3,000,000. The policy for capital structure is 45% debt and 55% equity.

(A) Determine the apparent dividend payout ratio and amount of potential dividends.

(B) Under a residual dividend policy, what is the relationship between the amount of capital investments undertaken and the dividends paid?

Reference no: EM132685566

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