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What is the maximum dividend

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Q1. This year, Ferris Co. is expected to earn a net profit of $8,500,000. Based upon this expectation, the Board of Directors has instructed management to increase Retained Earnings by $4,500,000 (without issuing or retiring any stock). The company currently has 2,000,000 shares outstanding with a current market value of $20 per share. The book value per share of stock is $12. What is the maximum dividend (per share) that can be paid to shareholders, yet still satisfy the Board's directive to increase Retained Earnings for the year?

A. $1.50/Share

B. $7.00/Share

C. $4.50/Share

D. $3.50/Share

E. $2.00/Share

Q2. Digby Co. stock has a market value (i.e. close price) of $30 per share and a book value of $15 per share. The company paid an annual cash dividend of $1.50 per share. What would be the investor's "dividend yield" here?

A. 08375 (8.375%)

B. 15 (15%)

C. 10 (10%)

D. 05 (5.0%)

E. 1125 (11.25%)

Reference no: EM133064414

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