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Victor Rumsfeld Inc.'s dividend policy is under review by its board. Its projected capital budget is...

Victor Rumsfeld Inc.'s dividend policy is under review by its board. Its projected capital budget is $2,000,000, its target capital structure is 60% debt and 40% equity, and its forecasted net income is $600,000. If the company follows a residual dividend policy, what total dividends, if any, will it pay out?

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Answer #1

residual dividend = net income *[equity percentage * capital requirement]

=> $600,000-[0.40 * $2,000,000]

=>$0.(since dividends paid cannot be negative, the answer will be rounded to $0).

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