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Axel Telecommunications' Target Capital Structure

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Axel Telecommunications has a target capital structure that consists of 70 percent debt and 30 percent equity. The company anticipates that its capital budget for the upcoming year will be $3,000,000. If Axel reports net income of $2,000,000 and it follows a residual dividend payout policy, what will be its dividend payout ratio?

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The solution calculates dividend payout ratio.

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1. The capital budget is 3,000,000. As per the target capital structure, the amount of debt will ...

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