Problem:
Axel Telecommunications has a target capital structure that consists of 70% debt and 30% equity. The company anticipates that its capital budget for the upcoming year will be $1,000,000.
Required:
Question: If Axel reports net income of $1,500,000 and it follows a residual dividend payout policy, what will be its dividend payout ratio?
Note: Please show how you came up with the solution.