Problem:
Axel Telecommunications has a target capital structure that consists of 60% debt and 40% equity. The company anticipates that its capital budget for the upcoming year will be $3,000,000.
Required:
Question: If Axel reports net income of $2,700,000 and it follows a residual dividend payout policy, what will be its dividend payout ratio?
Note: Please provide reasons to support your answer.