Assignment:
The Wei Corporation expects next year’s net income to be $15 million. The firm’s debt ratio is currently 40 percent. Wei has $12 million of profitable investment opportunities, and it wishes to maintain its existing debt ratio. According to the residual distribution model (assuming all payments are in the form of dividends), how large should Wei’s dividend payout ratio be next year?
Provide complete and step by step solution for the question and show calculations and use formulas.