Question

This year CVS reported net income of $722 million and paid out dividends of $207 million. If net income is projected to increase by 4% next year and the dividend payout ratio is expected to remain the same, what would be the projected dividends to be paid out next year (in $ millions, rounded to one decimal place, e.g., \$12.3)? In calculating the dividend payout ratio, please do not round beyond one decimal place, e.g., 34.5%.

Answer 1

To calculate the projected dividends to be paid out next year, we need to find the dividend payout ratio and apply it to the projected net income.

Step-by-step explanation:

To calculate the projected dividends to be paid out next year, we need to find the dividend payout ratio. The dividend payout ratio is calculated by dividing the dividends paid out by the net income. In this case, the dividend payout ratio is 207 million / 722 million, which is approximately 0.286.

To calculate the projected dividends for next year, we multiply the projected net income by the dividend payout ratio. The projected net income is 722 million + (722 million * 0.04), which is approximately 751.68 million. Multiplying this by the dividend payout ratio, we get the projected dividends to be paid out next year, which is approximately 751.68 million * 0.286 = 215.36 million dollars.