Question

A mutual fund owns 20,000 shares in Company Y. Company Y has 2 million shares issued. In one particular year, Company Y announces annual profits of $6 million, and decides to pay dividends to its shareholders at a rate of 15% of its annual profits. How much will the mutual fund receive in the form of dividends from Company Y? Round your answer to the nearest dollar.

Answer 1

Answer: $9,000

Explanation:

Step 1

Calculate the amount of dividends the company will pay to all its shareholders.

= 15% of profits

= 15% * 6,000,000

= $900,000

Step 2

Calculate how much dividends each share will get;

$900,000 to 2 million shares of Company Y.

= 900,000/2,000,000

= $0.45

Step 3

Calculate how much the Mutual fund will get for its 20,000 shares

= 20,000 * 0.45

= $9,000