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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?

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  1. 23 February, 14:33
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    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.
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Home » Business » 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?
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