What is effective rate by which dividend has been increased
Course:- Financial Management
Reference No.:- EM13927260

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Sanchez Supermarkets, Inc. (50,000 common shares outstanding) currently has annual earnings before interest and taxes of $1,000,000. Its interest expenses are $200,000 a year, and it pays $100,000 in annual dividends to its stockholders. The company's tax rate is 40 percent, and its common stock's current dividend yield is 2.0 percent.

a. Calculate the company's earnings per share.

b. Calculate the company's dividend payout ratio.

c. Calculate the company's current common stock price.

d. If Sanchez declares and pays a 100 percent stock dividend and then pays an annual cash dividend of $1.10 per share, what is the effective rate by which the dividend has been increased?

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