Queen City Sausage stock is selling at $40 per share,it has retained earnings of $1.00 per share,and dividends of $1.00 per share.What is the price-earnings ratio and what is the dividend yield?
A)20,2.5 percent.
B)20,5 percent.
C)40,2.5 percent.
D)40,5 percent.

Question

Quizplus · Accepted Answer

The price-earnings ratio (P/E ratio) is calculated by dividing the stock price by the earnings per share (EPS). In this case, the EPS is the sum of the retained earnings and dividends per share, which is $1.00 + $1.00 = $2.00. Therefore, the P/E ratio is:

P/E ratio = Stock price / EPS
P/E ratio = $40 / $2.00
P/E ratio = 20

The dividend yield is the ratio of the annual dividend per share to the stock price, expressed as a percentage. In this case, the dividend per share is $1.00, so the dividend yield is:

Dividend yield = Dividend per share / Stock price x 100%
Dividend yield = $1.00 / $40 x 100%
Dividend yield = 2.5%

Therefore, the best choice is A) 20, 2.5 percent.

Queen City Sausage Stock Is Selling at $40 Per Share,it