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Axel Telecommunications has a target capital structure that consists of 70 percent debt and 30 percent equity.

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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 distribution model with all distributions as dividends, what will be its dividend payout ratio?

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Solution Summary

This solution provides a brief, easy to understand calculation of dividend payout ratio using the dividend payout and net income information.

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Capital budget = $3,000,000.

Increase in equity = 30% * capital budget ...

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