Tradewinds Corp. has revenues of $9,651,220, costs of $6,080,412, interest payment of $511,233, and a tax rate of 34 percent. It paid dividends of $1,384,125 to shareholders. Find the firm's dividend payout ratio and retention ratio (Round the percentage answer to nearest whole number.)

Question

Quizplus · Accepted Answer

Dividend Payout Ratio = Dividends Paid / Net Income 
Net Income = Revenues - Costs - Interest - Taxes 
= $9,651,220 - $6,080,412 - $511,233 - (0.34 * ($9,651,220 - $6,080,412 - $511,233)) 
= $1,989,012

Dividend Payout Ratio = $1,384,125 / $1,989,012 
= 0.696 or 69% (rounded to nearest whole number)

Retension Ratio = 1 - Dividend Payout Ratio 
= 1 - 0.696 
= 0.304 or 31% (rounded to nearest whole number)

Therefore, the correct answer is C) 69%, 31%.