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Determining the residual dividend policy

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Rohter Galeano Inc. is considering how to set its dividend policy. It has a capital budget of $3,000,000. The company wants to maintain a target capital structure that is 15% debt and 85% equity. The company forecasts that its net income this year will be $3,500,000. If the company follows a residual dividend policy, what will be its total dividend payment?

  • $205,000
  • $500,000
  • $950,000
  • $2,550,000
  • $3,050,000

Reference no: EM131209597

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