Question:
Saturn Inc. expects to have net income of $20,000,000 during the next year. Saturn's target capital structure is 35 percent debt and 65 percent equity. The company's director of capital budgeting has has determined that the optimal capital budget for the coming year is $24,000,000. If Saturn follows a residual dividend policy to determine the coming year's dividend, then what is Saturn's payout ratio? Show calculations.