Flavortech Inc. expects EBIT of $3,000,000 for the current year. The firm's capital structure consists of...

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Flavortech Inc. expects EBIT of $3,000,000 for the current year.The firm's capital structure consists of 30 percent debt and 70percent equity, and its marginal tax rate is 40 percent. The costof equity is 14 percent, and the company pays a 10 percent rate onits $5,000,000 of long-term debt. One million shares of commonstock are outstanding. For the next year, the firm expects to fundone large positive NPV project costing $1,200,000, and it will fundthis project in accordance with its target capital structure. Ifthe firm follows a residual distribution policy (with alldistributions in the form of dividends) and has no other projects,what is its expected dividend payout ratio?
33.33%
35%
40%
44%
46.67%

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Flavortech Inc. expects EBIT of $3,000,000 for the current year.The firm's capital structure consists of 30 percent debt and 70percent equity, and its marginal tax rate is 40 percent. The costof equity is 14 percent, and the company pays a 10 percent rate onits $5,000,000 of long-term debt. One million shares of commonstock are outstanding. For the next year, the firm expects to fundone large positive NPV project costing $1,200,000, and it will fundthis project in accordance with its target capital structure. Ifthe firm follows a residual distribution policy (with alldistributions in the form of dividends) and has no other projects,what is its expected dividend payout ratio?33.33%35%40%44%46.67%