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Dividend Payout Ratio - Ronaldo Inc.

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Ronaldo Inc. has a capital budget of $1,000,000, but it wants to maintain a target capital structure of 60% debt and 40% equity. The company forcasts this year's net income to be $600,000. If the company follows a residual dividend policy, what will its dividend payout ratio?

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Solution Summary

The solution explains how to calculate the dividend payout ratio under the residual dividend policy, using step by step method and calculation.

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Total capital budget is 1,000,000
Financed by equity is 40%
Amount of equity needed is ...

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