   Chapter 15, Problem 15.26EX

Chapter
Section
Textbook Problem

Dividend yieldThe market price for Microsoft Corporation closed at $55.48 and$46.45 on December 31, current year, and previous year, respectively. The dividends per share were $1.24 for current year and$1.12 for previous year.a. Determine the dividend yield for Microsoft on December 31, current year, and previous year. Round percentages to two decimal place.b. Interpret these measures.

(a)

To determine

Dividend yield: This is the ratio which measures the amount of dividends paid relative to the market price.

Formula for dividend yield:

Dividend yield = Dividend price per share of common stockMarket price per share of common stock

To determine: The dividend yield for Corporation M, for current and previous years

Explanation

Determine the dividend yield for Corporation M, for current year, if annual dividend of common stock was $1.24 per share, and market price per share of common stock was$55.48.

Dividend yield = Dividend per share of common stockMarket price per share of common stock$1.24$55.48= 0.0224 or 2.24%

Determine the dividend yield for Corporation M, for previous year, if annual dividend of common stock was \$1

(b)

To determine

To explain: The changes in dividend yield

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