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Randy Corporation has a capital budget of 226.0 and and a Net Income of 13.0. If Randy's target
equity fraction is 0.3, what should Randy's dividend be under the residual dividend model?
Solution
Capital Budget = 226.0
Net Income = 13.0
Equity Ratio = 0.30
Dividend = Net Income - Capital Budget * Equity Ratio
Dividend = 13.0 - 226.0 * 0.30
Dividend = 13.0 - 67.80
Dividend = -54.80

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Randy Corporation has a capital budget of 226.0 and and a Net Income.pdf

  • 1. Randy Corporation has a capital budget of 226.0 and and a Net Income of 13.0. If Randy's target equity fraction is 0.3, what should Randy's dividend be under the residual dividend model? Solution Capital Budget = 226.0 Net Income = 13.0 Equity Ratio = 0.30 Dividend = Net Income - Capital Budget * Equity Ratio Dividend = 13.0 - 226.0 * 0.30 Dividend = 13.0 - 67.80 Dividend = -54.80