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Residual dividend model

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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 explains how to calculate the dividend payout under residual dividend model

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In a residual dividend policy, the net income is first used for investments. If anything is left that amount ...

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