The capital budget forecast for the Santano Company is $725,000. The CFO wants to maintain a…

The capital budget forecast for the Santano Company is $725,000.
The CFO wants to maintain a target capital structure of 45% debt
and 55% equity, and it also wants to pay dividends of $125,000. If
the company follows the residual dividend policy, how much income
must it earn, and what will its dividend payout ratio be?
Select the correct answer.

a. NI = $523,960

Payout = 23.90%

b. NI = $524,380

Payout = 23.96%

c. NI = $523,540

Payout = 23.84%

d. NI = $523,750

Payout = 23.87%

e. NI = $524,170

Payout = 23.93%