Braxton's Cleaning Company stock is selling for $34.75 per share based on a required returmn of 10.4 percent. What is the the next annual dividend if the growth rate in dividends is expected to be 3.9 percent indefinitely?

Question

Ross Benitez

Business

23 February, 14:28

Braxton's Cleaning Company stock is selling for $34.75 per share based on a required returmn of 10.4 percent. What is the the next annual dividend if the growth rate in dividends is expected to be 3.9 percent indefinitely?

+1

Answers (1)

Know the Answer?

Skylar Koch · Answer 1

Answer: Po = D1/Ke + g

$34.75 = D1/0.104 + 0.039

$34.75 - 0.039 = D1/0.104

$34.711 = D1/0.104

D1 = 34.711 x 0.104

D1 = $3.61

Explanation: In this question. there is need to apply the formula for determining the current market price of a common stock. The current market price of a common stock is a function of next dividend capitalised at the appropriate cost of equity plus growth rate. in addition, we need to make the next dividend the subject of the formula.