Answer:
52%
Explanation:
Before diving into the use of residual distribution model, first, let us specify what our Total Investment required, Equity, Next year net income is:
Total Investment Required = 12,000,000
Equity = 12,000,000 × (1 - 40%) = 7,200,000
Next Year Net income = 15,000,000
Using the residual distribution model
, we can specify that,
Retention Amount of Net income = Equity required = 7,200,000
and,
Dividend Distribution = Net income - Retention Amount of Net income
==> Dividend Distribution = 15,000,000 - 7,200,000
==> Dividend Distribution = 7,800,000
Therefore,
Payout ratio = Dividend Distribution ÷ Net income
==> Payout ratio = 7800000 ÷ 15000000 = 0.52
Therefore, the Payout ratio for next year will be 52%
