Question

The dividend policy of Berkshire Gardens Inc. can be represented by a gradual adjustment to a target dividend payout ratio. Last year Berkshire had earnings per share of $3.00 and paid a dividend of $0.60 a share. This year it estimates earnings per share will be $4.00. Find its dividend per share for this year if it has a 25% target payout ratio and uses a five-year period to adjust its dividend.

Answer 1

Answer:

$1

Explanation:

The computation of the dividend per share is shown below:

Given that

Earning per share for this year =4

Target Payout Ratio = 25%

Paid dividend per share = $0.60 per share

Based on the above information, the dividend per share is

= Earning per share  × Payout Ratio

= 4 × 25%

= 1

Therefore, Dividend per share is 1

We simply multiplied the earning per share with the payout ratio so that the dividend per share could come