Matt Kifer, president of Kifer Corporation, believes that it is a good practice
ID: 2442540 • Letter: M
Question
Matt Kifer, president of Kifer Corporation, believes that it is a good practice for a company to maintain a constant payout of dividends relative to its earnings. Last year net income was $639,000, and the corporation paid $138,900 in dividends. This year, due to some unusual circumstances, the corporation had income of $1,604,700. Matt expects next year's net income to be about $761,000. (Round payout ratio to 3 decimal places, e.g. 12.125 and dividends to 0 decimal places, e.g. 250,000. Use the rounded answers for future calculations.)What was Kifer Corporation's payout ratio last year?
give as a percentage.
If it is to maintain the same payout ratio, what amount of dividends would it pay this year?
$
Explanation / Answer
Last year Net Income = $639,000
Dividends paid = $138,900
Current year’s Net Income = $1,604,700
Next year’s expected net Income = $761,000
Dividend Payout Ratio = [Cash dividends / Net Income]
Last year’s Dividend Payout Ratio = [$138,900 / $639,000]
Last year’s Dividend Payout Ratio = 0.21737
Last year’s Dividend Payout Ratio = 0.21737 (or) 21.737%
If it is to maintain the same payout ratio, what amount of dividends would it pay this year?
Current year Dividend Amount = Dividend Payout ratio * Current year Net Income
Current year Dividend Amount = $1,604,700 * 0.21737
Current year Dividend Amount = $348,813.639
Current year Dividend Amount = $348,814