If a company has 14 million common and 5 million preferred shares outstanding with dividend per share of $2.8, reported earnings of $70 million and a dividend payout ratio of 25%, what was the dividend paid per share?

Question

Quizplus · Accepted Answer

First, you need to determine the total dividend payment, which is calculated as ($2.8 dividend per share) x (14 million common shares) x (25% dividend payout ratio) = $9.8 million.

Next, you need to determine the number of outstanding shares eligible to receive the dividend, which is calculated as (14 million common shares + 5 million preferred shares) = 19 million shares.

Finally, you can calculate the dividend per share by dividing the total dividend payment by the number of outstanding shares eligible to receive it: $9.8 million / 19 million shares = $0.516 per share. Rounded to the nearest cent, the dividend paid per share is $1.00, so the best choice is B.

If a Company Has 14 Million Common and 5 Million