Question

Moon and Sons Inc. earned $220 million last year and retained $155 million.  

What is the payout ratio? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
  

Polycom Systems earned $480 million last year and paid out 23 percent of earnings in dividends.

a. By how much did the company’s retained earnings increase? (Do not round intermediate calculations. Input your answer in dollars, not millions (e.g., $1,234,000).)
  

b. With 100 million shares outstanding and a stock price of $98, what was the dividend yield? (Hint: First compute dividends per share.) (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
  

Answer 1

Retained value = 155 million

Earnings = 220 million

Payout ratio = 1 - retention ratio

Payout ratio = 1 - 155/ 220

Payout ratio = 0.2955

Payout ratio = 29.55%

Part B

Addition to retained earnings = Earnings – Dividends

Dividends = 23% * 480 = 110.4

Addition to retained earnings = 480 - 110.4

Addition to retained earnings = 369.60 million

Addition to retained earnings = 369,600,000

Part B

Dividend per share = Dividend / Total shares

Dividend per share = 110.4/ 100

Dividend per share = 1.104

Dividend yield = Dividend per share/ Price of Share

Dividend yield = 1.104/ 98

Dividend yield = 1.13%