Tuesday 1 March 2011

Calculating Dividends

For example:


PBB
Par Value $1
Tax rate 25%


Company declared dividends per share of:


2nd Interim Franked Cash Dividend 25% Less Tax & 8% Single Tier Cash Dividend




What is the amount of dividend per share you should receive?


Answer:


[(25% x Par Value) x (1-Tax rate)] + 8% x Par Value
= (25% x $1) x (1 - 25%)] + 8% x $ 1
= ($ 0.25 x 75%) + $ 0.08
= $ 0.1875 + $ 0.08
= $ 0.2675


Therefore, you should receive $ 267.50 per 1000 shares (= $ 0.2675 x 1000 ).

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