Question

Residual Distribution Policy:

Puck’s Company has a capital budget of $1.1 Million. Puck’s company desires to maintain a target capital structure which is 35% debt and 65% equity. Puck’s company forecasts that its net income this year will be $800,000. If Puck’s company follows a residual distribution model and pays all distributions as dividends, what will be its payout ratio? Round your answer to two decimal places.