Answer:
B. 2 percent
Explanation:
<em>1. ANNUAL DIVIDEND:</em>
The net dividend paid to shareholders can be calculated as follows;
Retained Earnings = Net Income - Net Dividend Paid to the Shareholders
We are given the following information;
Retained Earnings = $2.4 million = $2,400,000
Net Income = $4 million = $4,000,000
Hence, by putting the above values in the equation as;
$2,400,000 = $4,000,000 - Net Dividend Paid to the Shareholders
or
Net Dividend Paid to the Shareholders = $4,000,000 - $2,400,000
Net Dividend Paid to the Shareholders = $1,600,000
or
Annual Dividend = $ 1,600,000
<em>2. CURRENT STOCK PRICE:</em>
Current stock price can be calculated as follows;
Current Stock Price = Outstanding Shares x Current price for a single share
We are given the following information;
Outstanding Shares = 1 million = 1,000,000
Current price for a single share = $80
Hence, by putting the above values in the equation as;
Current Stock Price = 1,000,000 x $80
Current Stock Price = $80,000,000
<em>3. DIVIDEND YIELD:</em>
Dividend Yield can be calculated as follows;
Dividend Yield =
Annual Dividend = $1,600,000
Current Stock Price = $80,000,000
Dividend Yield =
Dividend Yield = 0.02
Dividend Yield = 2%
Hence option B is the correct answer.
