Question

View Policies Current Attempt in Progress Hans Sheffield, president of Sheffield Corp., believes that it is a good practice for a company to maintain a constant payout of dividends relative to its earnings. Last year, net income was $650.000, and the corporation paid $130,000 in dividends. This year, due to some unusual circumstances, the corporation had income of $1,500,000. Hans expects next year's net income to be about $750,000 What was Sheffield Corp's payout ratio last year? If it is to maintain the same payout ratio, what amount of dividends would it pay this year? Payout ratio-last year % Dividends paid this year $ e Textbook and Media Save for Later Attempts: unlimited Submit Answer

Answer 1

Payout ratio Last year = 20 %

Dividend paid this year = $ 300,000

Calculation -Payout Ratio last year

Net income last year is 650000

Dividend paid last year is 130000

Payout ratio will be 130,000/650,000*100, i.e. 20 %

Calculation - Dividend paid this year

Net income this year is 1,500,000

Dividend paid this year will be net income * Divident payout last last year

=1,500,000*20%, i.e. 300,000