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Mannix Corporation stock currently sells for $29 per share. The market requires a return of 11.2 percent on the firm’s stock. If the company maintains a constant 3.6 percent growth rate in dividends, what was the most recent dividend per share paid on the stock?

Respuesta :

Answer:

$2.125

Explanation:

First, we calculate the expected dividend for year-1:

[tex]current\ share\ price=\frac{Expected\ dividend}{Required\ rate-Growth\ rate}[/tex]

[tex]29=\frac{Expected\ dividend}{(11.2-3.6)percent}[/tex]

[tex]29=\frac{Expected\ dividend}{7.6\ percent}[/tex]

Expected dividend = $29 × 7.6%

                               = $2.204

Current dividend share paid on the stock:

= Expected dividend - (Expected dividend × Growth rate)

= $2.204 - ($2.204 × 3.6%)

= $2.125

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