Brammer Corp.'s projected capital budget is $1,000,000, its target capital structure is 60% debt and 40% equity, and its forecasted net income is $550,000.If the company follows a residual dividend policy, what total dividends, if any, will it pay out?

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Under a residual dividend policy, dividends are paid out from the remaining net income after all profitable investment opportunities have been funded. Brammer Corp. needs $400,000 in equity (40% of $1,000,000) for its capital budget. With a net income of $550,000, the residual amount available for dividends is $150,000 ($550,000 - $400,000).