Kelly Varnsen, a junior financial analyst at Vandalay Industries, has been asked to calculate this year's dividend. Kelly has gathered the following data:
CAPEX (spending on fixed assets) = $17,000
Increase in net working capital = $3,000
Target capital structure is 20% debt and 80% equity
Net income is = $17,000.
If Vandalay follows a residual dividend policy, then the dividend payout rate this year is:
A) 20%
B) 25%
C) 30%
D) 35%
E) 40%
A
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