Mike, an attorney, earns $200,000 from his law practice and receives $45,000 in dividends and interest during the year. In addit
1 answer:
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Answer:
price earning ratio = 2
Explanation:
given data
Book value = $40 per share
Par value = $12 per share
Dividends = $5 per share
Dividend payout ratio = 20 %
Dividend yield ratio = 10 %
solution
first we get here market price per share by dividend yield ratio that is express as
dividend yield ratio = Dividends per share ÷ market price per share ........................1
put here value we get
market price per share =
market price per share = $50
and
now we get earning per share by dividend payout ratio that is express as
dividend payout ratio = dividend per share ÷ earning per share .................................2
put here value we get
earning per share =
earning per share = $25
so now we get here price earning ratio that is
price earning ratio = market price per share ÷ earning per share ..........................3
put here value we get
price earning ratio =
price earning ratio = 2