Last year, your firm had a dividend payout ratio of 65%. Their net income is $3.25 per share this year. How much will the retained earnings account increase per share if the payout ratio remains the same this year?
Its either 3.25 x .65 = 2.11 or 3.25 x .35 = 1.14
Thanks!
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Answers & Comments
The payout ratio says that 65% of the earnings per share are distributed as dividends.