The residual dividend policy approach is based on the theory that a firm^'s optimal distribution policy is a function of the firm^'s target capital structure, the investment opportunities that the firm has, and the availability and cost of external capital. The firm makes distributions based on the residual earnings.Consider the following example:Smith and Jones Co. is expected to generate dollar200 million in net income over the next year. Smith and Jones Co. has forecasted a capital budget of dollar88 million, and it wishes to maintain Its current capital structure of 70percent debt and 30percent equity. If the company follows a strict residual dividend policy and makes distributions in the form of dividends, what is its expected dividend payout ratio for this year?If Smith and Jones Co, increases its debt ratio, its dividend payout ratio will , assuming that all other factors are held constant. If you were to graph a firm^'s earnings and dividends over the past 20 years, which would you expect to be the most stable over time