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Mays, Inc. had net income for 2014 of $1,060,000 and earnings per share on common stock...

Mays, Inc. had net income for 2014 of $1,060,000 and earnings per share on common stock of $5. Included in the net income was $150,000 of bond interest expense related to its long-term debt. The income tax rate for 2014 was 30%. Dividends on preferred stock were $200,000. The payout ratio on common stock was 25%. What were the dividends on common stock in 2014? $215,000 $241,250 $265,000 $322,500

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Answer #1
Earning per share = Net income - Preferred dividend
Number of shares
$ 5 = $ 1,060,000 - $ 200,000
Number of shares
Number of shares = $ 860,000 / 5 = 172000
Dividend payout ratio = Dividend per share / Earning per share
0.25 = Dividend per share / $ 5
Dividend per share = 0.25 * $ 5 = $ 1.25
Dividend on common stock = Number of shares * Dividend per share
Dividend on common stock = 172000 * $ 1.25 = $ 215000
So first option of $ 215000 is correct
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