Residual dividend model: debt ratio
4. Blades Corporation is forecasting EPS of $2.50 this year on its 450,000 shares of stock outstanding. Its capital budget for the upcoming year will be $750,000. The company is also committed to maintaining its $1.25 dividend per share (DPS), and it wants to avoid issuing new common stock. The company’s capital structure consists of debt and common stock. Given the above constraints, what portion of the capital budget will be funded with debt?