Answer:
A) $191.08
B) The annual dividend = $0.85 per share
dividend yield = 1.78%
C) 3.14%
D) 13.74
E) $13.91
F) IBM's P/E at 13.74 is higher than Exxon Mobil P/E at 11.29
G) The possible reasons for the difference in P/E is due to the difference in EPS earned by each company and also the difference in stock price of each company's stock
Explanation:
Referring the the recent issue of the wall street Journal at NYSE-Composite Transactions
A) The Latest price of IBM stock = $191.08
B) What are the annual dividend payment and the dividend yield on IBM stock
The annual dividend = $0.85 per share
dividend yield = 1.78%
C) calculate what the yield will become if yearly dividend is moved up to $1.50
first we find the price per share
price per share = annual dividend per share / current dividend yield
= 0.85 / 1.78% = 0.85 / 0.0178 = $47.75
since we now have the price per share value we can now calculate the dividend yield
dividend yield = annual dividend / price per share
= $1.50 / $47.75 = 0.0314
= 3.14 %
D) Calculate the P/E on IBM stock
= 13.74 times as it was traded for the last 12 months
E) calculate IBM's earnings per share using P/E
earnings per share = Price / P/E
Latest price of IBM stock = $191.08
P/E = 13.74
earnings per share = 191.08 / 13.74 = $13.91
F) IBM's P/E at 13.74 is higher than Exxon Mobil P/E at 11.29
G) The possible reasons for the difference in P/E is due to the difference in EPS earned by each company and also the difference in stock price of each company's stock
.Therefore,initially Bill diner's opportunity cost of an additional hot dog is 1.4 units of burger.
approximately.Hence,Bill's diner is willing to sacrifice approximately 0.385 units of burger to consume an additional unit of hot dog.
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