Exam 13: Distribution of Retained Earnings: Dividends and Stock Repurchases

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Last year Universal Transportation retained $225,000 of the $750,000 net income it generated. This year Universal generated net income equal to $550,000. If Universal follows the constant payout ratio dividend policy, how much should it pay in total dividends this year?

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Pittsburgh Ecological Technology (PET) has been growing at a constant 4 percent rate for more than 10 years, and this growth is epxected to continue forever. Last year PET paid a dividend equal to $2.50 per share. If dividends grow at the same rate as the company's growth rate, what should be the per share dividend that PET pays this year?

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The primary factor that influences the dividend policies of companies around the world is the level of protection that exists for the rights of minority stockholders. 

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