Clarke co will pay out cash dividends equal to the residual amount that remains after funding 80 percent of its planned expenditures. The firm maintains 20 percent debt and 80 percent equity capital structure and doe not plan to issue more stock. The CFO estimates that the firm will earn $12 million in the current year.
If the firm maintains its target financing mix and does not issue any equity next year what is the most it could spend on capital expenditures next year given its earnings?
b. if the co capital budget for next year is $10 million how much will the firm pay in dividends?
c. What is the dividend payout percentage?