If share price rises from $12 to $15 per share, and pays a dividend of $1 per share, what was the rate of return to shareholders?

Question

Quizplus · Accepted Answer

To calculate the rate of return to shareholders, we need to consider both the capital gain from the increase in share price and the dividend paid.

The capital gain is calculated as (ending share price - beginning share price)/beginning share price, i.e. (15-12)/12 = 0.25 or 25%.

The dividend paid is $1 per share, which represents a percentage of (1/12) = 0.0833 or 8.33%.

The total rate of return is the sum of the capital gain and dividend percentage, i.e. 25% + 8.33% = 33.33%, which corresponds to choice C.

If Share Price Rises from $12 to $15 Per Share