What would happen to the payout ratio and dps


Assume that IWT has completed its IPO and has a $112.5 million capital budget planned for the coming year. You have determined that its present capital structure (80% equity and 20% debt) is optimal, and its net income is forecasted at $140 million. Use the residual distribution approach to determine IWT's total dollar distribution. Assume for now that the distribution is in the form of a dividend. Suppose IWT has 100 million shares of stock outstanding. What is the forecasted dividend payout ratio? What is the forecasted dividend per share ? What would happen to the payout ratio and DPS if net income were forecasted to decrease to $90 million ? To increase to $160?

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Finance Basics: What would happen to the payout ratio and dps
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