A company has EBIT=$100 million and tax rate of 21%. The firms plow back ratio is...

A company has EBIT=$100 million and tax rate of 21%. The firms plow back ratio is 30%. The company has 20 million shares. How much would be the firm's dividend per share?

A. 2.311

B. 2.765

C. 1.185

D. 3.500

Expert Solution

Profit after tax = $100* 79% = $79 million

Payout ratio = (1- plowback ratio)

= 70%
Total payout = $79 million * 70%
= $55.3 million

Dividend per share = $55.3/20

= $2.765 per share.

Option B is the correct answer.

jeff jeffy answered 2 years ago

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