Silvana Inc. projects the following data for the coming year. If the firm follows the residual dividend policy and also maintains its target capital structure, what will its payout ratio be? EBIT $2,000,000 Capital budget $850,000 Interest rate 10% % Debt 40% Debt outstanding $5,000,000 % Equity 60% Shares outstanding $5,000,000 Tax rate 40%

The dividend payout ratio is 43.33% as shown below

Explanation:

EBIT is an acronym for earnings before interest and tax, it is given as $2 million.In other words, to arrive at net income we need to deduct interest on loan and tax.

EBIT                                                 $2000000

less interest(5000000*10%)         ($500000)

Earnings before tax                       $1500000

Tax @40%                                        ($600000)

Net income                                      $900000

Since capital project requires 60% of equity(net income belongs to equity holders),hence we need to deduct 60% of capital outlay from net income to arrive at distributable earnings.

distributable earnings =$900000-(60%*$850000)

                                     =$390000

Hence dividend payout ratio=distributable earnings/net income

                                               =$390000/$900000

                                                =43.33%

the investment was $14,174.196

explanation:

a lump sum means that the father of the example made one deposit and leave it be.

we need to know the value of a capital that generated at 4.05% per year during 28 years the sum of $48,613.24

now clearing the formula to solve for capital we got:

and we reach the answer investment = $14,174.20

answerindustrial revolution;