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Bike Inc.’s expected net income for next year is $1 million. The company’s target and current capital structure is 40% debt and 60% common equity. The optimal capital budget for next year is $1.2 million. If Bike uses the residual distribution model to determine next year’s distribution and makes all distributions in the form of dividends, what is the expected payout ratio? (15 points)

Bike Inc.’s expected net income for next year is $1 million.
The company’s target and current capital structure is 40% debt and 60% common equity. The optimal capital budget for next year is $1.2 million.  If Bike uses the residual distribution model to determine next year’s distribution and makes all distributions in the form of dividends, what is the expected payout ratio? (15 points)
 
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The post Bike Inc.’s expected net income for next year is $1 million. The company’s target and current capital structure is 40% debt and 60% common equity. The optimal capital budget for next year is $1.2 million. If Bike uses the residual distribution model to determine next year’s distribution and makes all distributions in the form of dividends, what is the expected payout ratio? (15 points) appeared first on Superb Professors.

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