Question
In: Accounting
Company Dividend Yield Required Return Price Market Capitalization A 5% 4% $100 $1,000,000 B 4% 5%...
|
Company |
Dividend Yield |
Required Return |
Price |
Market Capitalization |
|
A |
5% |
4% |
$100 |
$1,000,000 |
|
B |
4% |
5% |
$10 |
$10,000,000 |
|
|
|
Solutions
Expert Solution
First part:
| Particulars | A | B |
| Market cap | 1,000,000 | 10,000,000 |
| / price | 100 | 10 |
| Shares outstanding | 10,000 | 1,000,000 |
| Price | 100 | 10 |
| × dividend yield | 5% | 4% |
| Dividend per share | 5.00 | 0.40 |
Company A has higher dividend per share.
second part:
Comapny B has higher growth rate as required rate is lesser than dividend yield.
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