Suppose a firm has a retention ratio of 40 percent and net income of $25

Finance Sep 27, 2020

Suppose a firm has a retention ratio of 40 percent and net income of $25.2 million. How much does it pay out in dividends?
Multiple Choice
O$63.00 million

O$10.08 million
O $25.20 million
O$1512 million

Expert Solution

Payout ratio=1-retention ratio

=(1- 0.4)

=0.6

Dividends paid= Net income* Payout ratio

=$25.2 million* 0.6

=$ 15.12 million.

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