Compute dividend rate from totals: A pharmaceutical company has issued 125,000 shares of par value $20 each. If the total annual dividend declared is $375,000, what is the percentage dividend rate paid by the company?
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A15%
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B13%
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C10%
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D14%
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E12.5%
Answer
Correct Answer: 15%
Explanation
Introduction / Context: To determine a dividend rate from company-wide totals, divide the dividend amount by the total par capital and convert to a percentage. This is a straightforward ratio application frequently used in stocks-and-shares aptitude problems.
Given Data / Assumptions:
- Total shares = 125,000.
- Par value per share = $20.
- Total dividend declared = $375,000.
Concept / Approach: Dividend rate (%) = (Total dividend / Total par capital) * 100, where total par capital = number of shares * par value.
Step-by-Step Solution:
Total par capital = 125,000 * $20 = $2,500,000.Dividend rate = ($375,000 / $2,500,000) * 100 = 15%.Verification / Alternative check: 10% of $2.5 million is $250,000; adding half again (5%) gives $125,000 more; total $375,000 confirms 15%.
Why Other Options Are Wrong: 13%, 14%, 12.5%, and 10% do not match the computed ratio exactly.
Common Pitfalls: Confusing par value with market value; forgetting to multiply shares by par before dividing.
Final Answer: 15%