Redwood Systems and forecasting company's income.
Redwood Systems follows a strict residual dividend policy. The company estimates that its capital expenditures this year will be $40 million, its net income will be $30 million, and its target capital structure is 60 percent equity and 40 percent debt. What will be the company's dividend payout ratio?
a. 80%
b. 60%
c. 40%
d. 20%
e. 15%