The stock of North American Dandruff Company is currently selling at $80 per sha
ID: 2699413 • Letter: T
Question
The stock of North American Dandruff Company is currently selling at $80 per share. The firm
pays a dividend of $2.50 per share.
a. What is the dividend yield?
b. If the firm has a payout rate of 50 percent, what is the firms P/E ratio?
Solution
Problem 18-10
Instructions
Enter formulas to calculate the requirements of this problem.
Information
Stock price$80
Dividend$2.50
a. What is the annual dividend yield?FORMULA in EXCEL
b. If the firm has a payout rate of 50 percent, what is the firms P/E ratio?FORMULA in Excel
Explanation / Answer
a. What is the annual dividend yield? FORMULA Annual dividend yield = Current Dividend/Current Price = 2.50/80 = 3.125% b. If the firm has a payout rate of 50 percent, what is the firm’s P/E ratio? FORMULA P/E ratio = Price/Earnings = 5/80 = 6.25% Earnings = Dividend/Payout ratio = 2.5/50% = 5
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