Question

Dave's Lumber earned $120 million last year and retained $72 million.

A. What is his payout ratio?

Step 1

Calculating the value of dividend paid. We have,

Value of dividend paid = Total Earnings – Retained Earnings

Here,

Total earnings = $ 120 million

Retained Earnings = $ 72 million

By substituting these value in the above formula. We get;

Value of dividend paid = $ 120 million - $ 72 million

Value of dividend paid = $ 48 million

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