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Lucas inc. earned $15 million last year and retained $6 million. lucas has 5 million shares outstanding, and the current price of lucas shares is $30 per share. what is the dividend payout ratio?

Respuesta :

The dividend payout ratio will be 60%.

As the Dividends Distributed equation is equal to net income minus the   retained earnings so-

Net Income = $15m

Retained earnings = $6m

Applying the formula

Dividends Distributed = Net Income –Retained Earnings

Dividends Distributed =$15m -   $6m  = $9m

Thereby the Dividends Distributed for last Year is $9m.

Then, considering the Dividends payout ratio is equal to the dividends distributed divided by the net income,

Dividends Payout Ratio  = Dividends Distributed ÷ Net Income*100

Dividends Distributed  = $9m

Net Income= $15m

Applying the formula

Dividends Payout Ratio = $9m  ÷ 15m *100 = 60%

So the dividend payout ratio = 60%

To learn more about Dividends payout ratio here

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