Suppose you know that a company’s stock currently sells ...



Suppose you know that a company’s stock currently sells for $47 per share and the required return on the stock is 11 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it’s the company’s policy to always maintain a constant growth rate in its dividends, what is the current dividend per share

Given Dividend Yield = 11/2 = 5.5

We know

(Dividend in One Year)/Current Price= .055

D1= .055*47

D1=2.585

D0 (Current Dividend) = 2.585/(1.055)= $2.45

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