Ask Question
1 March, 20:11

Suppose you know that a company's stock currently sells for $63 per share and the required return on the stock is 10.5 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?

+5
Answers (1)
  1. 1 March, 23:49
    0
    The answer is "$3.14 ".

    This is how we calculate this;

    R = Dividend yield + Capital gains yield = 0.105

    Dividend yield = Capital gains yield = 0.105 : 2 = 0.0525

    D1 = Dividend yield (D₁ / P₀) * Current stock price (P₀) = 0.0525 * 63 = $3.31

    D₀=D₁ / 1+g = 3.31 / 1.0525 = $3.14

    Thus, the current dividend per share is "$3.14".
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Suppose you know that a company's stock currently sells for $63 per share and the required return on the stock is 10.5 percent. you also ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers