Ask Question
4 August, 05:45

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?

+1
Answers (1)
  1. 4 August, 06:09
    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 the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers