A company has a retention ratio of 40%, net income of $17 million, and 10 million shares outstanding.What would be the dividend per share for this company?
A)1.10
B)1.02
C).95
D).82

Question

Quizplus · Accepted Answer

Retention Ratio = (Net Income - Dividends) / Net Income
0.40 = (17 million - Dividends) / 17 million
0.40 x 17 million = 6.8 million = 17 million - Dividends
Dividends = 10.2 million
Dividend per share = Dividends / Number of shares outstanding
Dividend per share = 10.2 million / 10 million
Dividend per share = $1.02

A Company Has a Retention Ratio of 40%, Net Income