Question

​Edelman, Inc. provides the following information for​ 2017:Net income​$190,000Market price per share of common stock​$20.00/shareDividends paid​$2.00/shareCommon stock outstanding at Jan.​ 1, 2017​140,000 sharesCommon stock outstanding at Dec.​ 31, 2017​180,000 sharesThe company has no preferred stock outstanding. Calculate the dividend payout ratio.​ (Round any intermediate calculations and your final answer to two decimal​ places.)

Answer 1

Answer:

Dividends payout ratio: 59.375%

Explanation:

Dividends payout ratio: the proportion of the earnings which are distributed among the shares.

$\frac{dividends}{income} \\or\\\frac{DPS}{EPS}$

Dividends per share:  2 dollars

Earning per share:

net income / average outstanding shares:

income 190,000

average outstanding shares: (140,000 + 180,000)/2 = 160,000

190,000/160,000 = 1.1875

Dividends payout ratio:

1.1875/2 = 0.59375 = 59.375%