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5.08 Shares and dividends

Worksheet
Shares and dividends
1

Calculate the share price if a company:

a

Has a market capitalisation of \$20\,000\,000 and issues 1\,000\,000 outstanding shares.

b

Has a market capitalisation of \$1\,500\,000 and issues 30\,000 outstanding shares.

c

Has a market capitalisation of \$2.2 million and issues 1.5 million outstanding shares.

2

The following graph shows the movement in the share price of a sporting goods company since the start of the month:

Use the line to predict the share price on day 21 to the nearest dollar.

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\text{Day}
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\text{Share price } (\$)
3

The following graph shows the movement in the share price of The Widget & Trinket Company since the start of the month:

Use the line to predict the share price on day 21 to the nearest ten cents.

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\text{Day}
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\text{Share price } (\$)
4

Calculate the dividend per share in each scenario:

a

A company's net profit of \$1\,200\,000 is distributed evenly among 500\,000 shares.

b

A company's net profit of \$726\,240 is distributed evenly among its 427\,200 shares.

5

A company has a net profit of \$1.9 million. If the company distributes all of its net profit to shareholders and declares a dividend of 30.4 cents, how many shares are there in the company?

6

A company declared a dividend of 50.5 cents per share and has 2.6 million shares. If the company distributed all of its net profit to shareholders, what was its net profit?

7

Homer would like to buy \$7000 worth of shares in Aluminium Exports Ltd.

a

If the current share price is \$2.95, how many shares can Homer buy? Give your answer rounded to the nearest whole share.

b

After a period of time, the price of the shares increases to \$4.72. At this point, Homer decides to sell all of his shares. What total profit does Homer make on the initial purchase?

c

The stockbroker charges Homer \$14 for the initial purchase and another \$18 for the sale. Calculate the net profit made on the sale with charges subtracted.

8

A company has a gross profit (i.e. before tax profit) of \$3.2 million.

a

If the company is taxed at a rate of 25\%, how much tax must it pay?

b

Find the company's net profit (i.e. after tax profit).

c

If there are 1.5 million shares in the company and the company decides to distribute its entire net profit to shareholders, what dividend will it declare?

9

Transit Industries has a total public value of \$891\,000\,000. This corresponds to 2\,300\,000 shares.

a

Calculate the price per share.

b

How many shares can be purchased with \$6000? Round your answer to the nearest whole share.

c

If \$6000 worth of shares were bought and then sold for \$8400, what is the profit made?

d

By what amount has the share price increased?

10

A company has a gross profit (i.e. before tax profit) of \$3.4 million.

a

If the company is taxed at a rate of 25\%, how much tax must it pay?

b

If the company decides to keep 4\% of the net profit to invest in future projects, what amount will be left over to distribute to shareholders?

c

If there are 2.4 million shares in the company, what dividend per share will it declare?

11

A company declared a dividend of 26.7 cents per share and has 1.5 million shares. If the company distributed all of its net profit to shareholders and is taxed at 25\% :

a

What was its net profit?

b

What was its gross profit (before tax profit)?

Dividend yield
12

Calculate the dividend yield (correct to one decimal place) for each of the following:

a

A firm with a share price of \$45.60 pays a dividend of \$1.73 per share.

b

A company with shares trading at \$2.50 pays a dividend of \$0.50 per share.

c

A company with shares valued at \$3.15 pays dividends of \$0.15 on the share.

13

Calculate the dividend per share when a company's share price and dividend yield is:

a

\$10 and 3\%

b

\$36 and 5.6\%

c

\$4.50 and 12.1\%

14

Calculate the share price of a company that pays a dividend of \$3.60 per share and has a dividend yield of:

a

6\%

b

4.7\%

15
  • Company A has a share value of \$7.50 and paid a dividend of \$0.57 per share.

  • Company B has a share value of \$8.75 and paid a dividend of \$0.84 per share.

  • Company C has a share value of \$13.75 and paid a dividend of \$1.21 per share.

a

Calculate the dividend yield for Company A.

b

Calculate the dividend yield for Company B.

c

Calculate the dividend yield for Company C.

d

Which company had the highest dividend yield?

16

Michael buys 3000 shares in Company A at \$7.50 each. The company pays a dividend of 69 cents per share. Michael also buys 1500 shares in Company B at \$5.00 per share, which pays a dividend of \$0.41 per share.

a

Calculate the dividend yield for Company A.

b

Calculate the dividend yield for Company B.

c

What is the overall dividend yield for Michael's investment?

17

Ursula buys shares in a company at \$1.64 per share. The company pays a dividend in July of 7.2 cents and a dividend in February of 5.1 cents. Find the dividend yield for the whole financial year?

18

A company has a net profit of \$10.5 million that it will fully distribute to the owners of its 87.5 million shares.

a

Calculate the dividend per share that will be paid to shareholders.

b

Calculate the dividend yield if the share price is \$13.86. Give your answer as a percentage correct to one decimal place.

c

In order to raise funds, the company issues another 2.9 million shares. Given that the company expects its profits to increase by 1\% in the next year and it intends to distribute all of its net profit to shareholders, what will its dividend yield be if its share price remains the same? Give your answer as a percentage correct to one decimal place.

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Outcomes

MS2-12-5

makes informed decisions about financial situations, including annuities and loan repayments

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