Brief Exercise 11-9 Hans Pina, president of Pina Colada Corp., believes that it

Question

Brief Exercise 11-9 Hans Pina, president of Pina Colada Corp., believes that it is a good practice for a company to maintain a constant payout of dividends relative to its earnings. Last year, net income was $610,000, and the corporation paid $115,900 in dividends. This year, due to some unusual circumstances, the corporation had income of $1,460,000. Hans expects next year's net income to be about $710,000 What was Pina Colada Corp.'s payout ratio last year? If it is to maintain the same payout ratio, what amount of dividends would it pay this year? (Round answers to 0 decimal places, e.g. 125.) Payout ratio-last year Dividends paid this year

Explanation / Answer

Payout Ratio (last year) = dividend paid / net income

= 115900 / 610000

= 19%

Dividend Current Year = Net Income x Payout ratio

= 1460000 x 19%

= $277400

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