Groeneweg Corporation has provided the following data: Dividends on common stock during Year 2 totaled $4,500.The market price of common stock at the end of Year 2 was $9.45 per share.The company's dividend payout ratio for Year 2 is closest to:

Question

Groeneweg Corporation has provided the following data:  Dividends on common stock during Year 2 totaled $4,500.The market price of common stock at the end of Year 2 was $9.45 per share.The company's dividend payout ratio for Year 2 is closest to:

Quizplus · Accepted Answer

Earnings per share = Net Income ÷ Average number of common shares outstanding*
= $33,500 ÷ 50,000 shares = $0.67 per share (rounded)
*Number of common shares outstanding = Common stock ÷ Par value
= $100,000 ÷ $2 per share = 50,000 shares
Dividend payout ratio = Dividends per share* ÷ Earnings per share
= $0.09 ÷ $0.67 = 13.4% (rounded)
*Dividends per share = Common dividends ÷ Common shares (see above)
= $4,500 ÷ 50,000 shares = $0.09 per share (rounded)

Groeneweg Corporation Has Provided the Following Data: Dividends on Common