Question

MN company expects to generate the following net income. Year Net Income 1 4,000,000 2 6,000,000...

  1. MN company expects to generate the following net income.

Year

Net Income

1

4,000,000

2

6,000,000

3

8,000,000

The company currently has 1,000,000 shares outstanding

  1. Determine earning per share in each year.
  2. Determine total dividend and dividend per share if a dividend pay out ratio of 50% is maintained.

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Homework Answers

Answer #1

Earnings per share = Net Income/Number of shares outstanding

Number of shares outstanding = 1,000,000

Total Dividend = Net Income * Dividend payout ratio

Dividend payout rate = 50% = 0.50

Dividend per share = Total Dividend/Number of shares outstanding

Year Net Income Earnings per share Total Dividend Dividend per share
1 4,000,000 4,000,000/1,000,000 = 4 4,000,000 * 0.50 = 2,000,000 2,000,000/1,000,000=2
2 6,000,000 6,000,000/1,000,000 = 6 6,000,000 * 0.50 = 3,000,000 3,000,000/1,000,000=3
3 8,000,000 8,000,000/1,000,000 = 8 8,000,000 * 0.50 = 4,000,000 4,000,000/1,000,000=4

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