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17 June, 23:39

Last year, Benton Inc. had net income of $3.5 million and paid out $700,000 in cash dividends. If income this year is $4.1 million and the dividend payout ratio is held constant, how much will be paid in dividends?

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  1. 18 June, 02:46
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    Dividend paid would amount to $820,000

    Explanation:

    The dividend payout ratio is a percentage of the net income paid to shareholders in dividends.

    That is;

    Dividend payout ratio = dividend paid out/net income

    If the ratio is held constant for both years, then

    $700,000/$3,500,000 = y/$4,100,000 (where y is the amount of dividend paid this year)

    y = 0.2 * $4,100,000

    y = $820,000
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