Question

What is the plowback ratio for a firm that has earnings per share of $12.00 and pays out $4.00 per share as dividends?

a. 25.00%
b. 33.33%
c. 66.67%
d. 75.00%

Answer 1

66.67%

Step-by-step explanation:

A firm has an EPS of $12

The dividend paid is $4

The first step is to calculate the payout

= 4/12

= 0.3333×100

= 33.33

Therefore the Plowback ratio can be calculated as follows

= 1-33.33%

= 0.667×100

= 66.67%

Hence the Plowback ratio is 66.67%