Question: Dentaltech Inc. projects the following data for the coming year. If the firm follows the residual dividend model and also maintains its target capital structure,

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

EBIT

$2,500,000

Capital budget

$1,275,000

Interest rate

10%

% Debt

40%

Debt outstanding

$6,500,000

% Equity

60%

Shares outstanding

5,000,000

Tax rate

25%

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