La Paz Restaurants Selected data from the company\'s financial statements are pr

Question

La Paz Restaurants

Selected data from the company's financial statements are presented below:

Refer to the information presented above for La Paz Restaurants. The 2015 dividend yield ratio is reported as:

La Paz Restaurants

Selected data from the company's financial statements are presented below:

2015 2014 Net income $110,000 $123,000 Cash dividends paid on common stock $21,000 $38,000 Year-end market price per share of common stock $12.00 $13.00 Shares of common stock outstanding 140,000 140,000

Explanation / Answer

The dividend yield ratio can be calculated with the use of following formula:

Dividend Yield Ratio = Dividend Per Share/Price Per Share*100

where

Dividend Per Share = Cash Dividends paid on Common Stock/Shares of Common Stock Outstanding

___________

Solution:

Dividend Per Share = 21,000/140,000 = $.15 per share

Dividend Yield Ratio = .15/12*100 = 1.25% (which is Option C)

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