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Q2. The following information is related to PQR company and XYZ company for the year 2013:...

Q2. The following information is related to PQR company and XYZ company for the year 2013:


PQR Company XYZ Company
Cash dividend declared and paid during the year $750,000 $124,800
Common stock $25,000,000 $12,000,000
Number of shares of common stock outstanding 50,000 24,000
Par value of a share $50 $50
Market value of a share $60 $52
Both the companies belong to same industry. PQR is an old and well-established company where as XYZ is a new company. The historical data shows that the PQR has a stable annual dividend distribution to stockholders.

Required:
Calculate dividend yield ratio of both the companies. Which company would you recommend for investment in shares? Explain with reasons.

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