Question

Dentaltech Inc. projects the following data for the coming year. If the firm follows the residual dividend policy and also maintains its target capital structure, what will its payout ratio be?

Answer 1

37.2%

Step-by-step explanation:

Payout ratio is the rate at which a firm distributes its net income. The payout ratio can be calculated as;

Payout Ratio = Dividends declared / Net Income

Payout ratio = $74,400 / $200,000 = 37.2%

Dentaltech Inc. has payout ratio of 37.2%