Edelman,Inc.provides the following information for 2017: $$\begin{array} { | l | l | }
\hline \text { Net income } & \$ 190,000 \
\hline \text { Market price per share of common stock } & \$ 20.00 / \text { share } \
\hline \text { Dividends paid } & \$ 2,00 / \text { share } \
\hline \text { Common stock outstanding at Jan. } 1,2017 & 140,000 \text { shares } \
\hline \text { Common stock outstanding at Dec. } 31,2017 & 180,000 \text { shares } \
\hline
\end{array}$$ The company has no preferred stock outstanding.Calculate the dividend payout ratio.(Round any intermediate calculations and your final answer to two decimal places. )

Question

Edelman,Inc.provides the following information for 2017: $$\begin{array} { | l | l | } 
\hline \text { Net income } & \$ 190,000 \
\hline \text { Market price per share of common stock } & \$ 20.00 / \text { share } \
\hline \text { Dividends paid } & \$ 2,00 / \text { share } \
\hline \text { Common stock outstanding at Jan. } 1,2017 & 140,000 \text { shares } \
\hline \text { Common stock outstanding at Dec. } 31,2017 & 180,000 \text { shares } \
\hline
\end{array}$$ The company has no preferred stock outstanding.Calculate the dividend payout ratio.(Round any intermediate calculations and your final answer to two decimal places. )

Quizplus · Accepted Answer

The dividend payout ratio is calculated as dividends paid divided by net income. In this case, dividends paid are $2 per share and net income is $190,000. The number of shares outstanding is the average of the shares outstanding at the beginning and end of the year, which is (140,000 + 180,000) / 2 = 160,000 shares. Therefore, the dividend payout ratio is $2 per share * 160,000 shares / $190,000 = 168.07%.

Edelman,Inc The Company Has No Preferred Stock Outstanding