quarterly earnings of $0.80 per share

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ska7945: Master | Next Rank: 500 Posts; Posts: 200; Joined: Thu Aug 07, 2008 5:14 pm; Thanked: 1 times

quarterly earnings of $0.80 per share

by ska7945 » Mon Sep 08, 2008 5:44 pm

A certain company expects quarterly earnings of $0.80 per share of stock, half of which will be distributed as dividends to shareholders while the rest will be used for research and development. If earnings are greater than expected, shareholders will receive an additional $0.04 per share for each additional $0.10 of per share earnings. If quarterly earnings are $1.10 per share, what will be the dividend paid to a person who owns 200 shares of the company’s stock?

A. $92
B. $96
C. $104
D. $120
E. $240

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Source: Beat The GMAT — Problem Solving | Mon Sep 08, 2008 5:44 pm

just_do_it: Senior | Next Rank: 100 Posts; Posts: 73; Joined: Thu Aug 07, 2008 7:33 pm; Thanked: 7 times; Followed by:1 members

by just_do_it » Mon Sep 08, 2008 7:22 pm

IMO C

quarterly earnings = $0.8 per share
50% of this will be used as dividend = $0.4 per share

but given the earnings are $1.1 per share

given that shareholders will receive an additional $0.04 per share for each additional $0.10 of per share earnings

since earnings are $1.1 which is $0.3 greater than expected, shareholders will get $0.04 for each additional $0.1 of per share earnings
in this case shareholders will get 3*$0.04 additional ( because for every 0.1 additional per share earnings, $0.04 is given out)

therefore total amount recd. as dividends will be

200*0.4 + 3*0.04*200
80+24
=$104

what is the OA ?

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cramya: Legendary Member; Posts: 2467; Joined: Thu Aug 28, 2008 6:14 pm; Thanked: 331 times; Followed by:11 members

by cramya » Mon Sep 08, 2008 7:24 pm

A certain company expects quarterly earnings of $0.80 per share of stock, half of which

I think the line above is what confuses.

.80/2 = .40 (paid as dividend)

Since the price per share came out to be 1.10, for each additional 10 cents its .04 so for .30 cents more its .12

Total dividend per share = .40 + .12 = .52

For a person with 200 shares the dividend will be 200*.52 = $ 104

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ska7945: Master | Next Rank: 500 Posts; Posts: 200; Joined: Thu Aug 07, 2008 5:14 pm; Thanked: 1 times

by ska7945 » Mon Sep 08, 2008 7:29 pm

oa c

let's beat GMAT.

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GMAT/MBA Expert

Scott@TargetTestPrep: GMAT Instructor; Posts: 8086; Joined: Sat Apr 25, 2015 10:56 am; Location: Los Angeles, CA; Thanked: 43 times; Followed by:29 members

by Scott@TargetTestPrep » Fri Mar 30, 2018 11:10 am

ska7945 wrote:A certain company expects quarterly earnings of $0.80 per share of stock, half of which will be distributed as dividends to shareholders while the rest will be used for research and development. If earnings are greater than expected, shareholders will receive an additional $0.04 per share for each additional $0.10 of per share earnings. If quarterly earnings are $1.10 per share, what will be the dividend paid to a person who owns 200 shares of the companyï¿½s stock?

A. $92
B. $96
C. $104
D. $120
E. $240

The person who owns the 200 shares will initially be paid dividends of 200 x $0.8 x 1/2 = $80.

The $1.10 is $0.30 more than expected, so the person will be paid an extra 3 x $0.04 x 200 = $24.

The total dividend will thus be 80 + 24 = $104.

Answer: C

Scott Woodbury-Stewart
Founder and CEO
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