Question

Helmuth Inc's latest net income was $1,500,000, and it had 225,000 shares outstanding. The company wants to pay out 45% of its income. What dividend per share should it declare? Do not round your intermediate calculations.

a. $3.24
b. $2.31
c. $3.21
d. $2.28
e. $3.00

Answer 1

Helmuth Inc should declare a dividend of $3.00 per share by paying out 45% of its net income, which equals $675,000, divided by the 225,000 shares outstanding.

Step-by-step explanation:

To calculate the dividend per share Helmuth Inc should declare, we first calculate the total dividend payout by multiplying the net income by the payout ratio:

Total Dividends = Net Income x Payout Ratio
Total Dividends = $1,500,000 x 45% = $675,000

Next, we divide the total dividends by the number of shares outstanding to find the dividend per share:

Dividend per Share = Total Dividends / Number of Shares
Dividend per Share = $675,000 / 225,000 = $3.00

Therefore, Helmuth Inc should declare a dividend of $3.00 per share.

Answer 2

e. $3.00

Step-by-step explanation:

For computing the dividend per share, first, we have to apply the dividend pay out ratio which is shown below:

Dividend = Net income × Dividend payout ratio

= $1,500,000 × 45%

= $675,000

Now the dividend per share would be

Dividend per share = (Total dividend) ÷ (number of shares)

= ($675,000) ÷ (225,000 shares)

= $3 per share