Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Suppose you know that a company's stock currently sells for $74 per share and the required return on the stock is 9.9 percent. You also

image text in transcribed
Suppose you know that a company's stock currently sells for $74 per share and the required return on the stock is 9.9 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. It's the company's policy to maintain a constant growth rate in its dividends. What is the current dividend per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Hint: First, compute the current dividend yield. Then, use that to compute the next dividend paid (in dollars per share). Then, using the constant dividend growth rate, compute the last dividend paid. The dividend is equal to the dividend yield multiplied by the stock price. Remember that the current stock price reflects future dividends, starting with D1, where D1 - Do(1+)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Personal Finance Turning Money Into Wealth

Authors: Arthur J. Keown

6th Edition

0132719169, 978-0132719162

More Books

Students also viewed these Finance questions

Question

=+d. Write at least five sentences or phrases for body copy.

Answered: 1 week ago

Question

=+b. Create a tagline.

Answered: 1 week ago