Question

The stock of Pills Berry Company is currently selling at $95 per share. The firm pays a dividend of $3.10 per share.

a. What is the annual dividend yield? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
b. If the firm has a payout rate of 25 percent, what is the firm's P/E ratio? (Do not round intermediate calculations and round your answer to 2 decimal places.)

Answer 1

The annual dividend yield for Pills Berry Company is 3.26%, and the P/E ratio is 7.66, based on the given dividend and payout rate.

Step-by-step explanation:

The question involves calculating the annual dividend yield and the price-to-earnings (P/E) ratio for the Pills Berry Company. To calculate the annual dividend yield, you divide the dividend per share by the price per share and multiply by 100 to get a percentage. The P/E ratio requires knowing the earnings per share (EPS), which can be found by dividing the total dividends paid by the payout rate.

The annual dividend yield would thus be: ($3.10 / $95) * 100 = 3.26%. To find the EPS, we divide the dividend ($3.10) by the payout rate (25%), resulting in an EPS of $12.40. Hence, the P/E ratio is the price per share divided by the EPS, which is $95 / $12.40 = 7.66.