The Costco Wholesale Corporation (COST) operates membership warehouses that offer a wide variety of branded and private label products in no-frills, self-service warehouse facilities. In 2008 the company paid total cash dividends of $265,029,000 and had net income of $1,282,725,000.
Required:
a. What was the firm's dividend payout ratio?
b. If Costco were to earn $1.58 billion in 2009 and maintained the same dividend payout ratio that it paid in 2008, what would the firm's dividends be?

a. 20.66%

b. $326,428,000.

Explanation:

a. The Costco Wholesale Corporation (COST) paid dividends to its shareholders. To calculate its dividend payout ratio:

(Total dividends paid / Net Income) * 100

= ($265,029,000 / $1,282,725,000) * 100

= 20.66%

b. If Costco earns $1.58 billion and maintains current payour ratio of 20.66% then its dividend will be;

$1,580,000,000 * 20.66%

= $326,428,000.

explanation:

the contractual interest rate is the interest the borrower must pay and the interest the lender receives, or more simply, it is the interest rate stated on a bond whereas the market interest rate is “the investors demand for loaning funds”. therefore, bonds can either be sold at a premium, face value, or discount.

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