Meadow Foods Ltd owns 18 000 ordinary shares in a regional dairy company. The dairy company announces a dividend of $0.14 per share. Meadow Foods originally...
Question 1 Report
Meadow Foods Ltd owns 18 000 ordinary shares in a regional dairy company. The dairy company announces a dividend of $0.14 per share. Meadow Foods originally paid $2.80 for each share.
(a) Calculate the dividend income received by Meadow Foods. Show your working. [2]
(b) Calculate the original value of the shares bought by Meadow Foods. Show your working. [2]
(c) Calculate the dividend yield as a percentage of the original value of the shares. Show your working. [3]
Answer Details
(a) Dividend income equals number of shares multiplied by dividend per share:
\[18\,000\times\$0.14=\$2520\]
Dividend income: $2520 [2].
(b) Original share value equals number of shares multiplied by original price per share:
\[18\,000\times\$2.80=\$50\,400\]
Original value: $50 400 [2].
(c) Dividend yield compares annual dividend income with the original investment:
\[\frac{\$2520}{\$50\,400}\times100=5\%\]
The dividend yield is 5% [3].
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