Answer (A) is correct . Dividend yield is computed by dividing the dividend per share by the market price per share. The payout ratio (.6) is computed by dividing dividends by net income per share (EPS). The P/E ratio (12) is computed by dividing the market price per share by net income per share. Thus, assuming that net income per share (EPS) is $X, the market price must be $12X and the dividends per share $.6X (.6 ¡Á $X net income per share). Consequently, the dividend yield is 5.0% ($.6X dividend ¡Â $12X market price per share).Answer (B) is incorrect because This percentage equals 12% times the payout ratio.
Answer (C) is incorrect because This percentage equals asset turnover divided by the P/E ratio.
Answer (D) is incorrect because This percentage equals 12% times the asset turnover ratio.
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The dividend yield on Watson’s common stock is
