Question

• During 2019, company XYZ had EBIT € 4049; net income € 1646; additions to retained earnings € 402 and tax rate 35 percent.
  
  Given this information, calculate the taxes paid.
  Given this information, calculate the interest expense.
  What is the dividend payout ratio? Express your answer as %.

Answer 1

EBIT. (A)    = 4049

Interest expense (B)(Note 2) = (2403)

Net income (C) = 1646

Tax @35% (D) (Note 1) = 576. (Tax= 1646*35%=576)

Net income after tax(E)(C-D) = 1070

Dividend (F) (E-G) = 668 (1070-402)

Retained Earnings (G) = 402

Note 1: Calculation of taxes paid:

Tax = Net income*35%

= 1646*35%

= 576

Note 2: Calculation of interest expense:

Interest expense = EBIT-Net Income

=4049-1646

=2403

Calculation of dividend payout ratio:

Dividend payout ratio = Dividend Paid/Net income

= 668/1646

=0.4058 or 40.58%