Flower Buds has had a very successful year and earnings are $72,000. The company has 60,000 shares outstanding and will pay a dividend of $0.50 per share. What are the dividend payout ratio and the retained earnings for the year?

A. 71.43%; $42,000.
B. 71.43%; $30,000.
C. 41.67%; $42,000.

Correct Answer: C

$DIV = 60,000(.5) = $30,000.
Payout = 30,000/72,000 = 41.67%
RE = NI - DIV = 72,000 - 30,000 = 42,000.