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?
Capital budget = $3,000,000.
Increase in equity = 30% * capital budget ...
This solution provides a brief, easy to understand calculation of dividend payout ratio using the dividend payout and net income information.