GM Lesson 019 Shares, Dividends and Spreadsheet Models

Learning Intentions

By the end of this lesson, students will be able to:

• Calculate dividends using dividend yield or dividend paid per share.
• Compare share values using the price-to-earnings ratio.
• Use a spreadsheet to display repeated financial calculations such as wages, budgets or annual car costs.

Prerequisites

Students should already be able to:

• Calculate a percentage of an amount.
• Convert percentages to decimals.
• Multiply decimals involving money.
• Interpret ratios in financial contexts.
• Enter and copy simple formulas in a spreadsheet.

Key Idea Summary

A share is a small part ownership of a company. A person who owns shares is called a shareholder.

A dividend is a payment made to shareholders. Dividends can be calculated using either:

• a dividend paid per share
• a dividend yield

The main formulas for dividends are:

where the dividend yield is written as a decimal.

The price-to-earnings ratio, or P/E ratio, compares the share price with the earnings per share.

A spreadsheet is useful when the same calculation must be repeated many times. For example, a spreadsheet can be used to calculate dividends for many shareholders, weekly earnings for many employees, a budget, or annual car costs.

Direct Instruction and Worked Examples

Time Allocation

Time Allocation

Time Allocation

• Introduction, warmup and vocabulary: 5 minutes
• Direct instruction: 15 minutes
• Understanding checks: 5 minutes
• Exercises: 20 minutes
• Homework: 20 to 30 minutes outside the lesson it was taught in.

Link to original

Direct Instruction 1: Dividends Paid Per Share

If a company pays a fixed dividend per share, then the total dividend depends on the number of shares owned.

Worked Example 1

A shareholder owns shares in a company. The company pays a dividend of $ per share.

Calculate the total dividend paid.

Therefore, the shareholder receives $ .

Direct Instruction 2: Dividend Yield

A dividend yield gives the dividend as a percentage of the share price.

The dividend yield must be converted to a decimal before multiplying.

Worked Example 2

A share has a price of $ . The dividend yield is .

Calculate the dividend paid per share.

First convert the percentage to a decimal.

Now calculate the dividend per share.

To the nearest cent, the dividend paid per share is $ .

Worked Example 3

A shareholder owns shares in the company from Worked Example 2.

Calculate the total dividend.

Using the unrounded dividend per share:

Therefore, the total dividend is $ .

Direct Instruction 3: Price-to-Earnings Ratio

The price-to-earnings ratio compares the share price with the company earnings per share.

A P/E ratio of means investors are paying $ for every $ of earnings per share.

Worked Example 4

Two companies have the following share information.

Company	Share price	Earnings per share
Company A	$	$
Company B	$	$

Calculate the P/E ratio for each company.

For Company A:

For Company B:

Company A has a P/E ratio of .

Company B has a P/E ratio of .

Company B has the higher P/E ratio.

Direct Instruction 4: Spreadsheet Models

Spreadsheets are useful when repeated calculations are required.

For example, a spreadsheet can calculate annual car ownership costs from monthly costs.

Item	Monthly cost	Annual cost
Loan repayment	$
Insurance	$
Fuel	$
Servicing	$
Registration	$

The formula is:

If the monthly cost is in cell B2, then the annual cost formula in cell C2 is =B2*12.

This formula can be copied down for each row.

The annual costs are:

The total annual cost is:

Therefore, the annual car ownership cost is $ .

If the annual costs are in cells C2:C6, then the spreadsheet formula for the total is =SUM(C2:C6.

The corrected spreadsheet formula is =SUM(C2:C6).

Understanding Checks

Understanding Check 1

A company pays a dividend of $ per share. A shareholder owns shares.

Calculate the total dividend.

Understanding Check 2

A share price is $ and the dividend yield is .

Calculate the dividend paid per share.

Understanding Check 3

A company has a share price of $ and earnings per share of $ .

Calculate the P/E ratio.

Understanding Check 4

In a spreadsheet, weekly wages are listed in cells B2:B11.

Write a spreadsheet formula that calculates the total weekly wages.

Understanding Check 5

Explain why a spreadsheet is useful when calculating dividends for many shareholders.

Exercises

Simple Familiar Exercises

Exercise 1

A shareholder owns shares. The dividend paid is $ per share.

Calculate the total dividend.

Exercise 2

A shareholder owns shares. The dividend paid is $ per share.

Calculate the total dividend.

Exercise 3

A share has a price of $ and a dividend yield of .

Calculate the dividend paid per share.

Exercise 4

A share has a price of $ and a dividend yield of .

Calculate the dividend paid per share.

Exercise 5

A company has a share price of $ and earnings per share of $ .

Calculate the P/E ratio.

Exercise 6

A company has a share price of $ and earnings per share of $ .

Calculate the P/E ratio.

Complex Familiar Exercises

Exercise 7

Mia owns shares in a company. The share price is $ and the dividend yield is .

Calculate:

a. the dividend paid per share b. Mia’s total dividend

Exercise 8

Noah owns shares. The company pays a dividend of $ per share.

Calculate Noah’s total dividend to the nearest cent.

Exercise 9

Two companies have the following information.

Company	Share price	Earnings per share
Alpha Ltd	$	$
Beta Ltd	$	$

Calculate the P/E ratio for each company and state which company has the higher P/E ratio.

Exercise 10

A spreadsheet is used to calculate weekly earnings.

Worker	Hours worked	Hourly rate	Weekly earnings
A		$
B		$
C		$

a. Write the formula for weekly earnings. b. If hours worked are in column B and hourly rates are in column C, write the spreadsheet formula for cell D2. c. Calculate the weekly earnings for each worker.

Exercise 11

A shareholder owns shares bought at $ each. The company has earnings per share of $ and pays a dividend of $ per share.

Calculate:

a. the total value of the shares b. the total dividend c. the P/E ratio

Homework Problems

Homework Problem 1

A shareholder owns shares. The dividend paid is $ per share.

Calculate the total dividend.

Homework Problem 2

A share has a price of $ and a dividend yield of .

Calculate the dividend paid per share to the nearest cent.

Homework Problem 3

A shareholder owns shares in a company with a share price of $ and a dividend yield of .

Calculate:

a. the dividend paid per share b. the shareholder’s total dividend

Homework Problem 4

A company has a share price of $ and earnings per share of $ .

Calculate the P/E ratio.

Homework Problem 5

Two companies have the following information.

Company	Share price	Earnings per share
Southern Co	$	$
Northern Co	$	$

Calculate the P/E ratio for each company and compare them.

Homework Problem 6

A spreadsheet contains the following monthly budget amounts.

Category	Monthly amount
Rent	$
Groceries	$
Transport	$
Phone and internet	$
Entertainment	$

a. Write a spreadsheet formula to calculate the annual amount for rent if the monthly amount is in cell B2. b. Write a spreadsheet formula to calculate the total monthly spending if the values are in cells B2:B6. c. Calculate the total monthly spending. d. Calculate the total annual spending.