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2) If a company has earnings per share (EPS) of $10.00 and it pays out $4.00 a share in dividends (DPS = 4.00); what is its
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Answer #1

Earning per share = EPS = $10

Dividend per share = DPS = $4

Payout ratio = DPS/EPS = 4/10 = 0.4 = 40%

Retention rate + payout ratio = 100%

Retention rate = 100% - 40% = 60%

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Payout ratio = 0.4 or 40%

Retention rate = 60%

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