A firm has had the following earnings history over the last five years: If the firm's dividend policy was to pay $0.25 per share each period except when earnings exceed $1.50,an extra dividend equal to 50 percent of the earnings above $1.50 would be paid,the annual dividends for 2012 and 2015 were ________.
A) $0.25 and $1.25, respectively
B) $0.25 and $0.75, respectively
C) $0 and $0.25, respectively
D) $0.25 and $0.25, respectively

Question

A firm has had the following earnings history over the last five years:  If the firm's dividend policy was to pay $0.25 per share each period except when earnings exceed $1.50,an extra dividend equal to 50 percent of the earnings above $1.50 would be paid,the annual dividends for 2012 and 2015 were ________.
A) $0.25 and $1.25, respectively 
B) $0.25 and $0.75, respectively 
C) $0 and $0.25, respectively 
D) $0.25 and $0.25, respectively

Quizplus · Accepted Answer

For the years 2012 and 2015, we need to check whether earnings exceeded $1.50 in those years and calculate dividends accordingly.

For 2012: earnings = $1.20, so dividend = $0.25 per share
For 2015: earnings = $1.80, so dividend = $0.25 + 0.5 * ($1.80 - $1.50) = $0.75 per share

Therefore, the annual dividends for 2012 and 2015 were $0.25 and $0.75, respectively. The correct answer is B.

A Firm Has Had the Following Earnings History Over the Last