Question

the earning per share of a company are RS 16. the market rate of discount to the company is 12.5%. retained earnings can be employed to yield a return of 10% calculate the market value of share under 25% payout radio​

Answer 1

Answer:

A company's dividend payout ratio gives investors an idea of how much money it returns to its shareholders compared to how much it keeps on hand to reinvest in growth, pay off debt, or add to cash reserves. This ratio is easily calculated using the figures found at the bottom of a company's income statement. It differs from the dividend yield, which compares the dividend payment to the company's current stock price.

Calculating the Dividend Payout Ratio

The dividend payout ratio is commonly calculated on a total basis using the following formula:

\begin{aligned} &\text{DPR} = \frac{ DP }{ NI } \\ &\textbf{where:}\\ &DP = \text{Dividends paid} \\ &NI = \text{Net income} \\ \end{aligned}

DPR=

NI

DP

where:

DP=Dividends paid

NI=Net income



Another way to calculate the dividend payout ratio is on a per share basis. In this case, the formula used is dividends per share divided by earnings per share (EPS). EPS represents net income minus preferred stock dividends divided by the average number of outstanding shares over a given time period. One other variation preferred by some analysts uses the diluted net income per share that additionally factors in options on the company's stock.

Where to Find Dividend Payout Ratio Numbers

The figures for net income, EPS, and diluted EPS are all found at the bottom of a company's income statement. For the amount of dividends paid, look at the company's dividend announcement or its balance sheet, which shows outstanding shares and retained earnings.

In order to calculate the number of dividends paid from the balance sheet, use the following formula:

\begin{aligned} &\text{DP} = ( NI + RE ) - REclose \\ &\textbf{where:}\\ &DP = \text{Retained earnings at the beginning of the} \\ &\text{reporting period} \\ & REclose = \text{Retained earnings at the end of the} \\ &\text{reporting period} \\ \end{aligned}

DP=(NI+RE)−REclose

where:

DP=Retained earnings at the beginning of the

reporting period

REclose=Retained earnings at the end of the

reporting period

Step-by-step explanation:

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