The shares of the Dyer Drilling Co. sell for $60. The firm has a P/e ratio of 15 Forty percent of earnings is paid out in dividends. What is the firms dividend Solution Dver drilling company Earnings per share- Stock price/price-earnings ratio $60/15=$4.00 Dividends per share Earnings per share x. 40 $4.00x.40=$160 Dividend yield Dividends per share/price $160/60=267% 18-11 Ms. Queen is in a 35 percent marginal tax bracket If Ms Queen receives a $3.80 in cash dividends, how much in taxes(per share) will she pay?(Recall the new 15% rule) Solutio Ms Queen Ms Queen $380 Cash dividend 15% Dividend tax rate S0.57 Taxes S-637 oyrightC2005 by The McGraw-Hill Companies, IncCopyright © 2005 by The McGraw-Hill Companies, Inc. S-637 18-10. The shares of the Dyer Drilling Co. sell for $60. The firm has a P/E ratio of 15. Forty percent of earnings is paid out in dividends. What is the firm's dividend yield? Solution: Dyer Drilling Company Earnings per share = Stock price/price-earnings ratio = $60/15 = $4.00 Dividends per share = Earnings per share x .40 = $4.00 x .40 = $1.60 Dividend yield = Dividends per share/price = $1.60/$60 = 2.67% 18-11. Ms. Queen is in a 35 percent marginal tax bracket. If Ms. Queen receives a $3.80 in cash dividends, how much in taxes (per share) will she pay? (Recall the new 15% rule) Solution: Ms. Queen Ms. Queen $3.80 Cash dividend 15% Dividend tax rate $0.57 Taxes