Answer:
(a) Dividend Yield = 3.125 percent
(b) P/E Ratio = 16 times
Explanation:
(a) Dividend yield = [tex]\frac{Current year dividend}{Price of the share}[/tex] X 100
Current year dividend = $2.5
Company's selling price of share = $80
Dividend yield = [tex]\frac{2.5}{80} X100[/tex] = 3.125 percent
(b) Given payout ratio is 50 percent that means earnings X 50% = $2.5
Earnings = [tex]\frac{2.5}{0.5}[/tex] = $5
P/E ratio = Price / Earnings = $80/$5 = 16 times.
Dividend Yield = 3.125 percent
P/E Ratio = 16 times
