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The Wei Corporation expects next year's net income to be $ 15 million. The firm's debt...

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Finance

The Wei Corporation expects next year's net income to be $ 15million. The firm's debt ratio is currently 40%. Wei has $ 12million of profitable investment opportunities, and it wishes tomaintain its existing debt ratio. According to the residual model (assuming all payments are in the form of dividends), how largeshould Wei's dividend payout ratio be next year?

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Solution Calculation of Residual Dividend The formula for calculating the Residual dividend is Residual Dividend Net Income Target Equity Ratio Capital Investment As per the information    See Answer
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The Wei Corporation expects next year's net income to be $ 15million. The firm's debt ratio is currently 40%. Wei has $ 12million of profitable investment opportunities, and it wishes tomaintain its existing debt ratio. According to the residual model (assuming all payments are in the form of dividends), how largeshould Wei's dividend payout ratio be next year?

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