Question

in its year 6 annual report, sally inc. reported net earnings of $4,242 million and dividends paid of $1,638 million. your forecast of net income for sally inc. for year 7 is $4,403 million. what are projected dividends for the company for year 7? select one: a. $1,324 million b. none of these are correct c. $1,700 million d. $1,578 million e. $1,638 million

Answer 1

The projected dividends for Sally Inc. in year 7 is $1,700 million. Therefore, the correct option is c. $1,700 million.

Step-by-step explanation:

To find the projected dividends for Sally Inc. in year 7, we need to consider the relationship between net earnings and dividends paid in year 6. In year 6, net earnings were $4,242 million and dividends paid were $1,638 million. The dividend payout ratio is calculated by dividing dividends paid by net earnings, so in this case it is $1,638 million / $4,242 million = 0.386.

To forecast dividends for year 7, we multiply the forecasted net income of $4,403 million by the dividend payout ratio: $4,403 million * 0.386 = $1,699.658 million. Rounded to the nearest million, the projected dividends for Sally Inc. for year 7 is $1,700 million, which corresponds to option c.