Andrews Corporation has 25,000 common shares authorized and 20,000 shares were issued and outstanding at year end.During the year,the corporation's net income after taxes was $50,000.The policy of the corporation has been to declare dividends equal to 15% of its net income.What is the per share amount to be distributed to the common stock holders?

Question

Quizplus · Accepted Answer

Number of shares outstanding = 20,000 shares
Net income after taxes = $50,000
Dividend payout ratio = 15%

Total dividend = Net income * Dividend payout ratio
Total dividend = $50,000 * 15%
Total dividend = $7,500

Dividend per share = Total dividend / Number of shares outstanding
Dividend per share = $7,500 / 20,000
Dividend per share = $0.375 a share

Andrews Corporation Has 25,000 Common Shares Authorized and 20,000 Shares