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John,
Not matter how long I look at this I still don’t understand the answer. I have answered every other question that has been generated by the question bank with relative ease yet this one baffles me….
Question:-
X Plc has a dividend yield of 8% and dividend cover of 2.4.
What is the PE ratio?
Thanks,
Divi Yield = Divi / MV
So MV = Divi / Divi yield = Divi / 0.08Dividend cover = EPS / Divi
So EPS = Divi cover x Divi = 2.4 xDiviPE = MV / EPS = (Divi / 0.08 ) / (2.4 x Divi)
Divide top and bottom by divi, so PE = 1 / (0.08 x 2.4) = 5.21
Got it, the answer has it slightly different however I do see the solution now, thanks John.
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