Suppose a firm has a retention ratio of 35 percent, net income of $35 million, and 10 million shares outstanding. What would be the dividend per share paid out on the firm's stock?

Question

Quizplus · Accepted Answer

The firm retains 35% of its net income, meaning it pays out 65% as dividends. The total dividends paid out is 65% of $35 million, which is $22.75 million. With 10 million shares outstanding, the dividend per share is $22.75 million / 10 million shares = $2.275.

Suppose a Firm Has a Retention Ratio of 35 Percent