Universal Utilities (U2) applies the low regular dividend plus extras policy when determining how much of its income will be paid out as dividends each year. U2’s policy states that the minimum dividend that will be paid each year is $0.50 per share. But,

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18.07.2022 - 18:54

Universal Utilities (U2) applies the low regular dividend plus extras policy when determining how much of its income will be paid out as dividends each year. U2’s policy states that the minimum dividend that will be paid each year is $0.50 per share. But,

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Universal Utilities (U2) applies the low regular dividend plus extras policy when determining how much of its income will be paid out as dividends each year. U2’s policy states that the minimum dividend that will be paid each year is $0.50 per share. But, when net income is greater than $600,000, the total dividend will be increased by 25 percent of the amount that exceeds $600,000. The firm currently has 100,000 shares of stock outstanding. What will be the dividend per share if U2 earns (a) $760,000 and (b) $580,000?

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Nell April 14, 2023 в 01:32

(a) If U2 earns $760,000, the portion of net income that exceeds $600,000 is $160,000 ($760,000 - $600,000). The total dividend increase for this excess is 25% x $160,000 = $40,000. The dividend per share will be the minimum of $0.50 per share plus the dividend increase divided by the number of outstanding shares. Thus, the dividend per share will be ($0.50 + $40,000/100,000) = $0.90 per share. (b) If U2 earns $580,000, the net income is less than $600,000, so no additional dividend is paid. The dividend per share will be the minimum of $0.50 per share, which equals $0.50 per share.

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