How do firms use long-run planning models to help set dividend policy? Which are more critical to the dividend decision, earnings or cash flow? Explain. Explain the procedures used to actually pay the dividend. What is the ex-dividend date, and why is it important to investors? A firm has a capital budget of $30 million, net income of $35 million, and a target capital structure of 45% debt and 55% equity. If the residual dividend policy is used, what is the firm’s dividend payout ratio?