Question

The common shares of the Owl Company have a book value of $10.80 and a market value of $14.30. The company pays $0.14 in dividends each quarter. What is the dividend yield?

A) 1%
B) 2%
C) 3%
D) 4%

Answer 1

The dividend yield for the Owl Company is found by dividing the annual dividend paid by the market value per share. The calculation shows that the dividend yield is approximately 3.92%, which rounds to 4%, so the correct answer is D) 4%.

Step-by-step explanation:

The dividend yield of the Owl Company's common shares can be calculated by dividing the annual dividends paid per share by the market value per share. The company pays $0.14 in dividends each quarter, which equates to $0.56 annually ($0.14 x 4). With a market value of $14.30 per share, the dividend yield is calculated as follows:

Dividend Yield = (Annual Dividends per Share / Market Value per Share) x 100

Dividend Yield = ($0.56 / $14.30) x 100

Dividend Yield = 3.92%
Thus, rounded to the nearest whole number, the correct answer is D) 4%.