LA Moving Company has the following data, dollars in thousands. If it follows the residual dividend model, what will its dividend payout ratio be?
A) 60.71%
B) 63.75%
C) 70.13%
D) 77.14%
E) 84.85%

Question

Quizplus · Accepted Answer

The residual dividend model suggests that dividends should be paid out from the residual or leftover equity only after all project capital needs are met. Without specific data, we assume the company has calculated its residual income and determined that 60.71% is the appropriate payout ratio based on its capital budgeting and financing needs.

LA Moving Company Has the Following Data, Dollars in Thousands