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Calculating Payout ratio

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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

Solution describes the steps for calculating dividend payout ratio using residual distribution model.

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Solution:

Capital Budget = $3,000,000
Target capital structure is 30 percent ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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