Assignment:
Petersen Company has a capital budget of $1.2 million. The company wants to maintain a target capital structure which is 60 percent debt and 40 percent equity. The company forecasts that its net income this year will be $600,000. If the company follows a residual distribution model and pays all distributions as dividends, what will be its payout ratio?
Provide complete and step by step solution for the question and show calculations and use formulas.