Question

The dividend policy of Berkshire Gardens Inc. can be represented by a gradual adjustment to a target dividend payout ratio. Last year Berkshire had earnings per share of $3.00 and paid a dividend of $0.60 a share. This year it estimates earnings per share will be $4.00. Find its dividend per share for this year if it has a 25% target payout ratio and uses a five-year period to adjust its dividend.

Answer 1

The dividend per share for this year can be calculated using the target payout ratio and estimated earnings per share. In this case, the dividend per share is $1.00.

Step-by-step explanation:

To find the dividend per share for this year, we need to calculate the target dividend payout based on the target payout ratio and estimated earnings per share.

The target dividend payout ratio is 25%, which means the company aims to distribute 25% of its earnings as dividends.

The estimated earnings per share for this year is $4.00.

So, the dividend per share for this year can be calculated as:

= $4.00 * 0.25

= $1.00

Therefore, the dividend per share for this year is $1.00.