Question

Presented below are selected data from the financial statements of Provost Corp. 2017 2016 Net income $110,000 $123,000 Cash dividends paid on common stock $42,000 $38,000 Market price per share of common stock at the end of the year $16.00 $13.00 Shares of common stock outstanding 140,000 140,000 The dividend payout ratio for 2017 is _____

Answer 1

Answer:

38.18%

Explanation:

Data provided in the question:

Year                                                                   2017              2016

Net income                                                     $110,000       $123,000

Cash dividends paid on common stock       $42,000        $38,000

Market price per share of common stock    $16.00           $13.00

Shares of common stock outstanding          140,000         140,000

Now,

Dividend payout ratio for 2017

= [ Dividend paid in 2017 ] ÷ [ Net income in 2017]

or

= $42,000 ÷ $110,000

= 0.3818

or

= 0.3818 × 100%

= 38.18%