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Ferman Corporation had net income of $160,000 and paid dividends of $50,000 to common stockholders and $20,000 to preferred stockholders in 2014. Ferman Corporation's common stockholders' equity at the beginning and end of 2014 was $870,000 and $1,130,000, respectively. Ferman Corporation's payout ratio for 2014 wasa. 5.0%.b. 43.8%.c. 31.3%.d. 12.5%.

Respuesta :

Answer: Option(b) is correct.

Explanation:

Given that,

Net income = $160,000

paid dividends to common stockholders = $50,000

paid dividends to preferred stockholders = $20,000

Total Dividends = paid dividends to common stockholders + paid dividends to preferred stockholders

                         = $50,000 + $20,000

                         = $70,000

Therefore,

[tex]Payout\ ratio=\frac{Total\ Dividend}{Net\ Income}[/tex]

[tex]Payout\ ratio=\frac{70,000}{160,000}[/tex]

                           = 0.4375

                           = 43.8%

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