Detailed Answer
Answer (A) is correct. Dividend yield is computed by dividing the dividend per share by the market price per share. The payout ratio (.6) is computed by dividing dividends by net income per share (EPS). The P/E ratio (12) is computed by dividing the market price per share by net income per share. Thus, assuming that net income per share (EPS) is $X, the market price must be $12X and the dividends per share $.6X (.6 × $X net income per share). Consequently, the dividend yield is 5.0% ($.6X dividend ÷ $12X market price per share).
